ISLAMABAD – The government yesterday announced a new auto policy pledging to protect consumers’ interests by creating a competitive environment through pulling more international carmakers to the Pakistani market.
The Automotive Policy 2016-2021 offers duty-free concession to new entrants in a bid to break the monopoly of existing three Japanese brands (Suzuki, Toyota and Honda) who have been accused of colluding to fix prices for lower-quality versions of their models.
The car assemblers in Pakistan have been fleecing the consumers for decades without bringing any innovation or international standard in its products, Khawaja Muhammad Asif, the country’s defence minister and head of a committee on auto policy, told a press conference.
“For the last few decades, three manufacturers had the monopoly over the auto market, and have established dealership that always discouraged the new entrants. The new policy aims at consumers’ protection and then enabling them to dictate the producers,” the minister said.
To encourage investment in the automobile industry, he said, the government has decided to give more incentives to the sector. The new policy would be valid for five years till 2021; however, improvement can be brought in it with the passage of time, he added.
Currently, car assemblers have distributed the market among themselves as one is producing small cars while two deal in big cars, the minister said. “With the entrance of few new players, healthy competition will emerge that will benefit the consumers in low prices and good quality, Khwaja Asif added.
He said that although Pakistani rupee appreciated against the Japanese Yen and steel prices have gone down but the automobile industry did not pass on the benefits to the consumers. Although the minister appreciated the contribution of these manufacturers in country’s Large Scale Manufacturing (LSM), he said “we cannot leave the consumers at the mercy of manufacturers”.
“These are car assemblers, we cannot call them manufacturers. They had to indigenise the production some 10 to 15 years ago, but still they are importing auto parts.” The auto-makers could not properly take advantage of a captive market as was done by motorcycle manufacturers, the minister said.
“Still these assemblers have not produced international quality of products, if they had, we would have exported them. They have failed in achieving breakthrough in export market,” Khwaja Asif said.
They have not yet introduced an international quality technology, including air bags, environmental friendly engines and others. “In world, euro-VI cars are used, while we are still on Euro-II. Our cars are consuming more fuel than the international standards.”
Miftah Ismail, chairman of the Pakistan Board of Investment said that after the implementation of the policy, new entrants will enter into the local market.
“Under this policy, we have targeted to increase cars production from existing 150,000 to 350,000 by end of this policy period in 2021.” The government has been in talks with various manufacturers and if they enter into the market, the deletion will almost complete and then cars manufacturing will indigenise.
Under the CBU (complete built unit) or finished product import, 10 percent duty cut has been proposed and which will be available in 2017-18. Import of used cars having age limit of three years as well as that of buses, vans, trucks, pickups, SUVs including 4X4 vehicles will continue, he said.
The new policy envisages two categories. One category is Greenfield investment i.e. installation of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles of a make, not already being assembled/manufactured in Pakistan (make is defined as any vehicle of whatever variant produced by the same manufacturer).
Another category is ‘Brownfield investment’ which is for revival of an existing assembly and/or manufacturing facility that is non-operational or closed on or before July 1, 2013, and the make is not in production since that date. And, that the revival is undertaken either independently by original owners or new investors or under joint venture agreement with foreign principal or by foreign principal independently through purchase of plant.
Chief Executive Officer of Engineering Development Board Tariq Ejaz Chaudhry said an automobile institute would be established and international standards by a forum for harmonisation for vehicle regulations – Working Party 29 – would be adopted to raise standards of the automotive industry.
Under the Greenfield category, new investors will be allowed duty free import of plant and machinery for setting up the assembly and / or manufacturing facility on a one-time basis; (ii) import of 100 vehicles of the same variant in CBU form at 50 per cent of the prevailing duty for test marketing after ground breaking of the project; (iii) concessional rate of customs duty @ 10 per cent on non-localised parts and @ 25 per cent on localised parts for a period of five year for the manufacturing of cars & LCVs; (iv) import of all parts (both localised and non-localised) at prevailing customs duty applicable to non-localised parts for manufacturing of trucks, buses and prime movers for a period of three years; (v) for motorcycle industry, existing policy as approved by the ECC and notified by FBR vide 939(1) 2013 and SRO 940(1) 2013 shall continue.
Under Brownfield category, investor will be entitled to import non-localised parts at 10 per cent rate of customs duty and localised parts at 25 per cent duty for a period of three years for the manufacturing of cars and LCVs. Besides, import of all parts (both localized and non-localized) parts for manufacturing of trucks, buses and prime movers for a period of three years.