Automark

The Director General Customs Valuation has issued new custom values on August 25, 2016 after three years for import of motorcycle helmets ranging between $2.60 to $9.60 per piece of Chinese and other countries origin based on the prevailing prices in world markets.

Customs values for bike helmets (half and full face and cross shaped) specified shall be assessed to duty/taxes of above customs values.

The Customs said valuation methods given in Section 25 of the Customs Act 1969 were followed. Transactions value method provided in Section 25 (I) was found inapplicable because the requisite information was not available. Identical/ similar goods value methods provided in Section 25 (5) and (6) were also not found helpful in determination of values due to wide variation in values. Consequently market enquiries as envisaged under Section 25(7) of the Customs Act 1969, were conducted and customs values of bike helmets were determined under Section (7) of the Customs Act 1969.

The values determined in the ruling shall be the applicable customs value for assessment of subject imported goods until and unless it is rescinded or revised by the competent authority.

Market sources said that previous ruling on full face helmet of China was $2.53 per piece while valuation of half face helmet was $2.23.

They said the import duty on helmet ranges between 16-20 per cent, additional customs duty of one per cent, 17 per cent sales tax, additional three per cent sales tax and six to nine per cent income tax. Considering the valuation ruling of $2.80 of a Chinese helmet at 16pc ST, one per cent additional customs duty, three per cent additional sales tax and six per cent income tax, the cost of import for a helmet comes to Rs 440. On the contrary, full face helmet of Chinese origin sells between Rs 800 to Rs 4,000 while half face helmet sells between Rs 750 to Rs 3,500. Some branded cross shape helmet is priced Rs 5,000, but after the sindh Govt’s announcement for bike rider wearing compulsory helmets, the prices of helmets increased.

Association of Pakistan Motorcycle Assemblers (APMA) Chairman Mohammad Sabir Shaikh said it is also unclear whether imports of helmets from China at same of European standards or average quality is arriving into Pakistan.

He said customs department does not have any study regarding category of helmets arriving from China as certified helmets are already very costly in China starting from minimum $10 to $35 per piece and sub standard helmets are priced between $4 to $13 per piece.

Thanks to the rising demand for two- and four-wheelers in Pakistan due to China-Pakistan Economic Corridor (CPEC), both car and bike segments of the Atlas Group have been recording high sales in recent months.

Bike-maker Atlas Honda sold 76,309 units in August alone while car-maker Honda Atlas has so far booked orders for over 18,000 new Civics since its launch in June 2016.

“After the pre-launch on June 6, there have been approximately 18,500 orders for the new Honda Civic,” Honda Drive-In and Honda Quaideen CEO Shabir Alibhai said.

Honda Atlas is delivering Civic I-VTEC within one month of the booking date followed by two to three months’ delivery time for Civic Turbo 1.5 and four months for Civic Oriel 1.8. Bookings are made at 50 per cent of the value of the car.

In the motorcycle segment, Atlas Honda had achieved sales of 73,259 units in January followed by 73,078 units in April.

A spokesperson for the bike maker said the two-wheeler market is responding well to the company’s competitive pricing strategy and timely response to customer needs.

He said the company is nearing the completion of 1.3 million-unit capacity expansion form the previous capacity of 750,000 units per annum.

While the demand for CG125 and 100cc bikes is on the rise, CD70 is leading the company’s sales with the monthly demand clocking up at more than 50,000, he added.

Karachi is also experiencing a surge in demand. The city is a big credit sales market, but Honda is selling on cash “even in this tough market,” he claimed.

“Our target is to increase the capacity utilisation of the new factory as soon as possible,” he added.

The bike manufacturer sold 811,034 units in 2015-16 as opposed to 653,193 units in 2014-2015, reflecting a year-on-year rise of 24.1 pc.

Sabir Shaikh said Honda is going strong because of its high quality unlike Chinese bike assemblers. Most of the Chinese bike assemblers prefer selling cheap and affordable bikes to increase sales, he added.

Out of the total annual production of about 2m bikes, Honda manufactures around 800,000 units of original Honda CD 70 and CG 125, Chinese bike assemblers roll out up to 1.1m units of replica of CD 70 and CG 125 while all other models and brands including Suzuki & Yamaha assemble and  sales 100,000 units every year. The very notable and important point is that out of 02 million 1.9 million bikes are original and replica of CD 70 and CG125.

Suzuki bike sales plunged 9.5pc to 2,825 units in July-August from 3,121 units in the same two-month period of the preceding fiscal year.

In 2015-2016, Suzuki’s sales decreased to 17,456 units from 22,703 units recorded in 2014-2015, down 23.1pc year-on-year. Yamaha sold only 2,044 units in July-August as opposed to 3,450 units in the same period a year ago, showing an annual decline of 40.7pc.

FBR has its focus on revision and streamlining of customs values as well as data interchange with the exporting country to eliminate under-invoicing.

Sources said that the delegation of Pakistan Customs would also hold meetings with Customs of China to discuss issues pertaining to the trade related aspects under China-Pakistan Economic Corridor (CPEC).

The import bill of parts and accessories used in assembling vehicles locally rose 8.5 per cent year-on-year to $841 million in the last fiscal year, even higher than $537m spent on imports of completely built-up (CBU) units.

According to the Pakistan Bureau of Statistics (PBS), imports of completely knocked-down (CKD) and semi-knocked-down (SKD) kits was $775m in the fiscal year 2014-15 and that of CBU was $406m.

In the imports of auto parts including CKD’s and commercial imports of after market parts of cars, motorcycles, LCV’s, heavy commercial vehicles and tractors massive mis declaration and under invoicing by the importers and assemblers of different categories and in different dry ports is one of the famous story in Tax evasion history of FBR in Pakistan.

Sources said the industry is importing hi-tech parts not manufactured in Pakistan while auto-parts makers are also importing finished parts, castings, sub assemblies, sub components and raw material, mis using the SRO 655/I-2006.

Based on the import figures of $841m for CKD/SKDs and $537m for CBU units in FY16, a total of 216,000 units were assembled, including cars and LCVs, the former Paapam chairman said. In contrast, imports of used cars were more than 50,000 units in same fiscal year, he said.

The combined imports of SKD/CKD units and parts and accessories (after market) come to $1.17 billion in 2015-16 compared to $1.09 bn in 2014-15.

Sabir Shaikh said hi-tech parts were not produced in Pakistan despite rising sales, especially of motorcycles. Rising imports of parts suggested local vendors were unable to meet demand and the industry was buying it from the commercial importers, he said.

“There is a need to form an independent audit team which can check the actual localization levels achieved by the industry in various auto segments,” he said, adding that despite high sales of bikes, nobody from Pakistan had made serious effort to set up a carburetor plant. “We are still an assembly-based industry as major parts come from abroad.”

Federal Board of Revenue (FBR) has increased duty on auto parts by one percent over and above the duty structure approved in the Auto Development Policy (ADP) 2016-2021, the 1% increased in Custom Duty already implemented from July 2016 under SRO 693/2006.

Sabir Shaikh argue that if the government starts intervening in the auto policy from day one, the fate of new auto policy will not be different from the previous policy and new investors will stay away from Pakistan. “I feel imposition of one per cent additional duty on auto sector components is an attempt to discourage new investment in this sector,” said Muhammad Sabir Shaikh.

Pakistan’s Motorcycle assemblers have a total installed capacity of 4 million motorcycles per annum but the production for the last fiscal year was record two million units, out of total 02 Million sales 1.9 million bikes are original and replica of CD 70 and CG 125.

Due to tough competition between bike assemblers some assemblers are in a precarious position owing to which they are failing to pay the outstanding amount on received parts for production from their vendors.

Consumers have failed to get any benefit from the huge lot of assemblers as they have been producing more than three decades old replica of CD-70, 70cc models mainly and due to competition they are decreasing the quality of products.

The difference in valuation of the import of motorcycle parts between commercial importers and assemblers – valuation for assemblers is mostly higher – is leading to an increase in the  smuggling of motorcycle parts from China, industry officials said.

Customs department increased valuation on motorcycle items or parts for local assemblers, which commercial importers import from China on lower valuations. Thus, smuggling increased manifold with 124 assemblers out of which 80 assemblers are active  in the country now some of them are using smuggled parts in the motorcycle assembling industry.

Commercial importers are those who import motorcycle parts for approximately 20 million motorcycles that are plying on the country’s roads. On the other hand, motorcycle assemblers import parts from China and then use them in the assembling industry.

One more important point for fixing valuation for import of motorcycle parts that Honda is producing original CD 70 and CG 125 motorcycles, all other Chinese based assemblers are producing replica of CD 70 and CG 125 motorcycles which are 40% lower priced than original Honda.

This exclusive article on Pakistan Automotive Sector, published in AutoMark Magazine October-2016 printed edition

IT COULD STOPPED ALL NEW INVESTMENT

GOVERNMENT SHOULD REVIEW OTHERWISE ADP 2016-21 MAY BE A TOTAL FAILURE 

The Government of Prime Minister Muhammad Nawaz Sharif, decided in October 2013, to set up a Committee to formulate an Automotive Development Policy (ADP) that can provide a solid framework to strengthen the sector further, laying down a comprehensive, well-defined roadmap that aims essentially to lower the entry threshold for New Investment, create enabling tariff structure for development of the Automotive Sector, rationalize automobile import policy.

The Policy has been formulated after due consultation process with all import stakeholders including Pakistan Automobile Manufacturer Association, Pakistan Association of Automotive Parts and Accessories Manufacturers, Pakistan Association of Spare Parts Importers and dealers etc etc. Most importantly, the consumers’ interest was also the main consideration.

Government opinion is that the motor cycle industry has tapped market potential, while local car assemblers have failed despite enjoying several incentives like duty exemption. These assemblers have not even turned into manufacturers due to their failure in completing the localization programme. This is really the hard fact.

Engineering Development Board which is a part of federal ministry of industry and production and Board of Investment jointly announced the Auto Development Policy 2016-21, on 2nd June 2016. This policy is warmly welcomed by all relevant quarters. However old players of automobile industry who were enjoying monopolized situation in the market and pocketing huge some of money in shape of premium on every unit were not happy, rather annoyed. It may be noted that premium money is not taxable, it falls purely in the category of black money. Now this lobby is active and want that ADP 2016-21 could not become successful. They have their own traditional techniques to dilute the advantages and benefits of new policy.

The basic objective for announcement of five year policy is to ensure the new investors that this policy will consistent for 5 years and no change shall be made in the policy during this five years. So investor shall be satisfied that his investment is risk free. Unfortunately the Government has made a great change / amendment in this policy within the 25 days after the announcement, through SRO 483 dated 29th June, 2016. Now it is compulsory that every light commercial vehicle assembler has to establish ED Coat Painting system in his upcoming auto assembly plant. This is a new conditionality which was not mentioned at the time of announcement of the policy. This one word change, makes a very very negative impact upon the new investor / assembler. The cost / investment of existing conventional painting system is in between 2 and 3 crore rupees, where as the cost of ED coating painting system is around 30 to 40 crore rupees and every month running cost is around 1 crore to 2 crore rupees.

Light commercial vehicles plays a pivotal role in progress of economy. They are suitable for inter city transport of goods. They are the main tool to transport agriculture goods from farms to main roads. They also use for the transportation of passenger in country side and in small towns. These are utility vehicles, do not need extraordinary cosmetics. Their main function is loading of goods. So customer wants powerful engine and sturdy chassis. He is not more conscious about the looks and cosmetics of the vehicle. ED coating painting system mainly enhance the looks and cosmetic value of vehicle. It may necessary for the car but for light commercial vehicles it is not very much necessary.

Furthermore conventional primer painting system is largely acceptable by the Pakistani customers and even Heavy duty trucks are still allowed to do conventional primer painting system. This also creates an anomaly into the policy.

If we analyze the economic viability of the upcoming project in reference to sales / production volume and payback period of investment. One can easily understand the difference of 40 crore and 2 crore rupees. So if a new comer / investor install ED coating painting system the project will become totally unviable.

In the light of above mentioned facts, it is very much clear that new investment in automobile sector shall be totally stopped and government hopes and objectives shall not be materialized. As a result situation of unemployment will not improve. The old players of automobile industries shall maintained their monopolized stature. Customers will suffer immensely and forced to pay huge premium money as usual. Automobile sector experts has the opinion that Government policies should focus on technology transfer. It may be noted that still auto industry of Pakistan is restricted to the assembly work. Not a single company is producing the components of the following critical and functional parts.

a)    Engine

b)    Transmission

c)    Gear Box

d)    Axles

e)    Ignition System

f)     Clutch System

g)    Braking System

h)    Motors etc

i)     Wind Serene & Door Glasses

Japanese companies are working in Pakistan since 90’s but they are doing only welding, painting and assembly. Old players who have total grip on automobile industry and enjoying monopoly wish to continue this situation. They want to keep entangle new players in the same area i.e. welding, painting and assembly functions. Government authorities may review this unnecessary and damaging amendment in the policy and allowed the new players in this segment to establish a conventional primer painting system as per existing procedure.

Exclusive review by Anwar Iqbal, published in Monthly AutoMark Magazine’s October-2016 printed edition

Omega Industries established in 1995 in pursuit of empowering the Automotive Industry for Motorcycles and Rickshaws manufactures in Pakistan and have a professional team of sale, service and spare parts. The Industry is committed to providing necessary skills, knowledge, hands-on training and soft skills to the underserved youth which allows them to exploit employment

To appreciate dealers company have arranged a incentive tour to Singapore, Malaysia and Bangkok.

Meanwhile, Omega Industries held a convention 2015-16 in Bangkok hosted by Faisal Mufti Groups Senior Marketing Manger of Road Prince. The purpose of this convention was to meet their dealers under one roof and also want to appreciate their dealer’s employ in form of awards / Shield for their achievements.

There was a big ceremony at the occasion, This event was so special as another milestone achievement by this group were announced. Mr. Zhang of DFSK Group and Omega Industries Group Chairman Sohail Usman singed MOU for cooperation in 4 wheel business.

General Manager, Mr. Zhang, of DFSK group, China and Omega launches 3 models. Mr. Zhang addressed with the convention and announced that they will be happy to award the distribution ship of automobile to Regal Automobiles Industries Ltd. He also elaborates the features of the vehicle that these kinds of automobiles are very useful in Pak-Chine corridor due to its suspension and comfortable drive. These vehicles are designed as per quality and accordance with the market competition for customer’s satisfaction.

Mr.Tanveer Ahmed, CEO Omega Industries, also addressed with the convention. He was pleasure to see the progress of their dealers and their employers. He thanks to Mr. Zhang to trust on our group and ensure him for better services of their newly launched vehicles. He also appreciated the organizer of the convention.

Mr. Sohail Usman, Chairmanr Omega Industries, was also preset and he welcomes all the dealers at the occasion.

Dongfeng Motor Group, China

The story of DFSK can be traced back to DFM (Dongfeng Motor Group, China), originally founded in 1969.  Dongfeng is now China’s third largest vehicle manufacturer, selling almost 2 million vehicles representing a 10.8% share of the Chinese marketplace.

DFSK was formed as a joint venture between DFM and DFSK Group and today operate six manufacturing sites within China, producing mini vans, motorcycles, ATVs and shock absorbers. They have gained international quality certificates ISO9001, 3C and Environmental Certification ISO12000.

Such is DFSK engineering excellence that they are currently engaged in partnerships with several of the world’s leading motor manufacturers, making their vehicles for the Chinese domestic vehicle market. In 2014 DFSK commercial vehicles achieved sales of over 290,000 with a forecast of 360,000 sales for 2015.

This exclusive media coverage has been published in Monthly AutoMark Magazine’s October-2016 printed edition

The Foton Group of China has showed  keen interest in investing in manufacturing a range of automobiles in Pakistan. A delegation from Foton Group China held a meeting with the Finance Minister on Friday and praised the pro-investment policies of the government. Among others the meeting was attended by Chairman Board of Investment and Special Assistant to Prime Minister on Revenue.

The Finance Minister welcomed the delegation and appreciated its plans for investment in Pakistan. He said that the government has earlier this year announced the new auto policy for the next five years and encouraged the Chinese company to make use of the opportunities for investment offered under this policy, in consultation with the Chairman Board of Investment (BOI).

Electric vehicles have a huge range of potential applications, from ludicrous passenger cars to distribution trucks, but delivery vans running around the city stacks up as one of the best uses of quiet, zero-local emissions technology. With the new e-Crafter, launched today at IAA in Hannover, Volkswagen has turned to battery power for urban delivery duties on routes up to 200 km.

The e-Crafter has 100 kW (134 hp) of power and 290 Nm of torque, while top speed is limited to 80 km/h (50 mph), which should be plenty for operators carrying up to 1,700 kg (3,748 lb) on regular city roads, although it may prove problematic if drivers find themselves on faster moving highways and motorways.

The motors draw on a 43 kWh lithium-ion battery sitting under the load floor. Although range will vary based on the load being carried, Volkswagen is claiming the e-Crafter can cover up to 208 km (129 mi) on a single charge. Using a DC 40 kW fast charger, the battery can be topped up to 80 percent in just 45 minutes.

That range figure is 38 km (24 mi) more than the Nissan e-NV200 can manage, although the Nissan’s 120 km/h (75 mph) top speed is 40 km/h (25 mph) higher than the e-Crafter’s.

Although the current range is impressive, it’s just the tip of the iceberg when it comes to the e-Crafter’s potential. The van has been designed to accommodate future battery developments, meaning the current range could potentially be doubled as technology improves.

Volkswagen says the electric Crafter holds the same amount of cargo as the regular petrol and diesel models launched in July. It shares the same impressive 0.33 Cd as the regular van, and the impressive range of driver aids is also available.

From the outside, there’s not a heap setting the e-Crafter apart from internal-combustion models. Alongside the special blue paintwork, there are distinct daytime running lights up front, and some blue pieces on trim in the grille. It’s a similar story inside, where swapping the rev counter for a “power meter” is the only real change of note.

The whole thing, from the cabin to the design, is quite utilitarian – but that’s the point here. Drone carrying, fully integrated electric concepts are exciting, but it’s bare-bones practicality that will get businesses to adopt electric vehicles. The e-Crafter is just a regular van with an electric powertrain, and that’s all most buyers will need.

The e-Crafter shown at IAA is just a pre-production concept, but Volkswagen says it’s almost production ready. Deliveries are slated for 2017.

Source: Volkswagen Commercial

According to one Board of Investment official, Volkswagen is the second biggest automaker in world and wants to carry their cars to Pakistan.

German Ambassador, Dr Cyrill Nunn has revealed that an Investors’ delegation of 14 members is coming to Pakistan to explore possible investment venues and among them one member is a representative of Volkswagen group.

The shining light for Pakistani Auto Enthusiasts shimmers bright as the Pakistani government is finally interested in bringing this European automaker in. The Big Three of Pakistan face actual competition this time. Prior to this, by taking help of Korean Hyundai, Dewan Farooq had tried to compete with the Big Three, but instead of gaining something, his entire venture was demolished on its face. Probabaly, VW will consider the automobile past of Pakistan and a local partner will be chosen.

To assemble their bikes in Pakistan, Yamaha took more than 5 years and it is a bike company. User can imagine how much time VW will take to kick start their first assembly plant and subsequently launch cars in Pakistan. Pakistan government has been asked by VW officials to attach medium-knocked down units in the auto policy.

#Pakistan #Germany #Dawns In Pakistan #Volkswagen

Frankfurt 17^th Sept-2016: Pakistani exhibitors received very positive response from Germany and other European countries during the Automechanika 2016 at Frankfurt , Germany, which ends today.

It was interesting to note that many established Chinese and Indian Auto Parts Export Houses showed keen interest in buying Pakistani auto parts on account of their quality, price and product range.

With several tractor, truck and car assembly lines operating in Pakistan, it has become an attractive source of quality spares for agricultural tractors like MF and CNH. Similarly, several companies have products for the Heavy Duty Truck and Trailer market and did brisk business with distributors who were visiting Automechanika from all over the world.

Mashood Ali Khan, PAAPAM Senior Vice Chairman, while talking to the media , said that many genuine buyers had visited Pakistani stands , and discussed in detail about the products and  that he expects that exporters from Pakistan will get substantial business from Automechanika Frankfurt.

Members of the Pakistan Auto Parts Manufacturers Association, PAAPAM, are competing with China, India, Thailand and Vietnam in the export market. “We are confident of getting orders from across Europe and other countries,” Mashood said.

Pakistani exporters are continuously gaining market access to Europe, mainly through the high quality export-related skills training imparted by the Dutch CBI, Centre For Promotion of Exports From Low Cost Countries through their Export Coaching Programs. CBI has a stand in Hall 6.3 at the Automechanika 2016, where three Pakistani companies, from the current Export Coaching Program are also exhibiting under guidance of CBI Expert, Mr. Jan Oude Elferink & others under the umbrella of  TDAP.

Mashood Ali Khan, who will soon assume charge of Chairman PAAPAM, also met representative of Thailand, Morocco, Brazil, Taiwan, China, Iran, Turkey and other auto parts associations during the Automechanika, to invite them to participate in the Pakistan Auto Show, PAPS 2017, 3-5 March,2017.

The main effort was  to create a close liaison between PAAPAM and other associations for future

business cooperation.

Pakistani companies that had been participate in Automechanika Frankfurt ,Germany included A-One Techniques, Darson Industries (Pvt) Ltd, Eastern Agro Industries, Harris Silicon and Gas (Pvt) Ltd, Infinity Engineering (Pvt Ltd), Jodhala Complex (Pvt) Ltd, Kortech Auto Industries (Pvt) Ltd, Landhi Engineering (Pvt) Ltd, MannanShahid Forging Ltd, Mehran Commercial Enterprises, Rastgar Engineering Company (Pvt) Ltd, Rubatech Manufacturing Co Ltd, Thal Engineering, Thermosole Industries (Pvt) Ltd, and Ahmed Traders.

Automechanika Frankfurt is the world’s largest auto parts trade fair catering to aftermarket sourcing, garage equipment and retail sales chains.

Finance Minister Ishaq Dar briefed representatives of two major automobile companies; Renault and Peugeot, on Pakistan’s expanding vehicular market during his recent visit to France.

On last week, Ishaq Dar met with the representatives of the European companies and apprised them of the opportunities that Pakistan presented to them. He also mentioned the latest automotive policy introduced by the government, which is attractive for new car manufacturers.

It should be mentioned that the new policy allows them to play less taxes on import of parts and various other incentives that can help new entrants in the automotive field set up their operations in Pakistan.

Dar also stated that Pakistan’s economy is booming after terrorist and political setbacks in recent times. The minister also reflected on microeconomic stability, sustained gross domestic product growth, stable exchange rate and higher consumer spending.

Renault and Peugeot were also made aware of the constant demand in Pakistan’s market for new cars which is an incentive for any car manufacturer. Minister Dar invited them to join the Pakistani market and lay the foundation for newer players in this field.

Members of the two leading French automobiles appreciated the economic turnaround in Pakistan and showed their keen interest in working together.

Chairman Bol, Ambassador of Pakistan to France and French Ambassador to Pakistan also observed these meetings.

The global consumers’ freedom of choice and effective competition in the market for vehicle replacement parts, tools and equipment, servicing and repair was discussed by representatives of automotive aftermarket associations from Australia, Brazil, Europe, South Africa, the United States, South-East Europe and many other as part of the world during a global ‘Right to Repair’ meeting in Frankfurt on the occasion of the Automechanika Trade Show this week.

The first part of the meeting focused at exchanging common experiences against the different economic and legislative national backgrounds. The group discussed the challenges that are being faced to safeguard access to the technical repair and maintenance information required to correctly service and maintain increasingly sophisticated vehicles throughout the world and the worldwide efforts to clarify that consumers have the right to have their vehicle serviced and repaired by independent operators “from day one” during the vehicle’s warranty period and without that the warranty may be invalidated.

Access to repair and maintenance information is crucial for fair competition and the provision of competitive aftermarket products and services – an issue which is increasingly important as vehicles become ‘computers on wheels’. This has already been recognised through pertinent legislation in and outside the European Union.

Through the exchange of information at this meeting, it was recognised that these aftermarket issues are common throughout the world. However, it was also felt that motoring consumers in many developed markets do not yet enjoy even the minimum level of legislative support to provide them with a real freedom of choice, creating an unbalanced situation which needs to be addressed.

The second part of the meeting focused on the growing threat to competition in the vehicle repair industry that is being caused by the use of embedded telematics systems on vehicles and the impact on the aftermarket. The currently proprietary design of the telematics technology creates a new challenge that needs to be addressed in all markets worldwide to ensure that it does not undermine existing direct communication with the vehicle and its data and consumers’ right to choose. The meeting discussed the common aim to create an interoperable platform with interfaces and direct access to the in-vehicle data ensuring innovation and effective competition and the need for a framework either through an E.U. legislation or, depending on other legal systems outside the E.U., through a mandatory code of practice.

At last long awaited ‘Automobile Development Policy 2016-21 is announced. It will certainly pave the way for new international vehicles manufacturers to enter in the Pakistani market. This will create a healthy environment of competition in the local industry.

The new automobile policy will offer tax incentives to new entrants in order to help them to establish manufacturing units in Pakistan and effectively compete with the existing three assemblers, who are operating since the early 90s.

A major incentive for the new investors is reduced 10% customs duty on non-localized parts for five years against the current 32.5%. For investors, the duty will be slashed by 2.5% to just 30% from the new fiscal year of 2016-17.

Beginning from July, the localized parts can be imported by the new entrants at 25% duty compared to the current 50% for five years. A single duty rate will be applied to the localized and non-localized parts after five years of the new policy. The present duty structure will continue for seven years for the new investors. For existing players, the duty on import of localized parts will be brought down to 45% from the new fiscal year.

The government has allowed one-off duty-free import of plant and machinery for setting up an assembly and manufacturing facility. It has also permitted import of 100 vehicles of the same variants in the form of completely built units (CBUs) at 50% of the prevailing duty for test marketing after the groundbreaking of the project. This is called green field project. The definition of new investor has again been changed to deny certain benefits to the existing auto players.

Greenfield is now defined as “installation of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles of make not already being manufactured in Pakistan.” For the revival of sick or non-operational units, the non-localized parts can be imported at 10% and localized parts at 25% duty for three years. This is called Brownfield project. The government has included the word ‘make’ and deleted the word ‘assembled’. It has defined ‘make’ as “any vehicle of whatever variant produced by the same manufacturer.”

The present stakeholders in the Pakistan automotive industry are not happy with the new policy. Pak Suzuki, the largest car maker in terms of market share, calls the policy a “disaster”. A spokesperson for Pak Suzuki, said that “The government is requesting auto companies to come and invest in Pakistan. On the other hand, it is not giving equal incentives to the existing players who are ready to invest billions of rupees.”

Two key players in the automobile industry – Indus Motor and Pak Suzuki Motor Company – have challenged some clauses of the new auto policy and got a stay order from the Sindh High Court against its implementation, indicating they are not immediately inclined towards offering technologically improved and cheaper vehicles. According to the new auto policy, Indus Motor was to install immobilizers in its XLI (basic) variants, Suzuki in Cultus and Mehran models and Honda Atlas Cars in the City variant. However, the carmakers have refused to install the immobilizers immediately, arguing it is not possible for them to complete the task in a short time. They require six months to one year as vehicle engines need to be changed for putting in place the anti-theft device.

An effective auto policy should do two things for a country; increase employment and industry by increasing the manufacturing sector, and of course, allowing for increasing sales and increasing the volume of cars bought by the public, which ideally should be cheaper and of better quality.  The local plants of Japanese companies such as Toyota Honda and Suzuki do their part in employing a sizable workforce, but a large part of the current demand for automobiles rests on the shoulders of the second-hand import dealership business, which is not labor-intensive. The government resisted changes to the import of used cars to Pakistan. Additionally, the government has offered new entrants duty-free import of their entire plant and machinery among other benefits.

At the end of the day, it is important to remember that more cars do not solve the problem of transportation across the country. Rural areas still have a very limited number of private cars present, and of course the average citizen cannot even afford any form of personal transport. Looking beyond city centers, one can see that Pakistan’s infrastructure is still not completely ready to take on a sudden influx of thousands of new cars that might be injected into the market if the pricing policy of the new entrants is competitive. While the regime looks to invite new manufacturers, the interest displayed by the companies themselves can be termed lukewarm at best. While a lot of demands have been heard and catered to, important issues such as setting the definition for a medium-knocked down unit have been left out of the policy. With the policy in place, the time has arrived for the government to consider practical issues, and ensure that as promised, new competition not only enters the market, but gives a fight to the old established players.

New auto policy do not focus on technology transfer. In my point of view some special incentives should be offered for technology transfer. It may be noted that still auto industry of Pakistan is restricted to the assembly work. Not a single company is producing the components of the following critical and functional parts.

1. Engine
2. Transmission
3. Gear Box
4. Axles
5. Ignition System
6. Clutch System
7. Braking System
8. Motors etc
9. Wind Serene & Door Glasses

Japanese companies are working in Pakistan since 90’s but they are doing only welding, painting and assembly. Now it is the time that some of the above mentioned component manufacturing should start in Pakistan whatever the facilitation and incentive required should be provided through new auto policy, even to the old players, for real technology transfers specially for the local assembly and manufacturing of the above mentioned components.

Exclusive written by Anwar Iqbal for Monthly AutoMark Magazine, published in September-2016 printed edition