Engineering Development Board (EDP) and Ministry of Industries and Production have started working on the new Automotive Industry Development and Export Plan (AIDEP) 2021-26 as the existing Auto Development Policy (ADP) 2016-21) is set to expire in June this year.
According to reports, the AIDEP 2021-26 will focus on facilitating the manufacturing of affordable cars, which will lead to cost reduction, price stability, and employment generation in the country.
AIDEP 2021-26 is also expected to significantly reduce customs duty, additional customs duty, and federal excise duty for the entire auto sector.
However, in return, the government will negotiate with car manufacturers for a reduction in car prices, increase in localization, and concerted efforts to increase exports.
Note that around 45% of the price of a vehicle that a consumer pays goes to the government in duties and taxes.
It includes customs duty on import of localized parts is 45% while 30% on non-localized parts and a 7% additional customs duty on import of all parts. There is also up to 7.5% federal excise duty on different engine capacities. In addition to this, there is a 17% sales tax on the sale of a car.
An industry source said that the government can significantly reduce car prices by slashing taxes and duties.
For instance, if automakers are to bring the price of a modern hatchback down to Rs. 1 million from Rs. 1.5 million, the government must reduce exorbitant duties and taxes, the source added.