Category: Automotive

PkRevenue provides stories related to automotive industry. We focus on auto policy of Pakistan. The coverage also includes sales of domestic manufacturing.

Sharp growth recorded in import of CBU, CKD motor cars

ISLAMABAD: A sharp growth has been witnessed in import of motor cars in the categories of Completely Build Unit (CBU) and Completely Knocked Down (CKD) during first nine months (July – March) of 2020/2021.

The import of motor cars in both the categories recorded over 100 percent growth.

According to data released by Pakistan Bureau of Statistics (PBS) the import of CBU motor cars increased by 149 percent to $161.21 million during first nine months of the current fiscal year as compared with $64.8 million in the corresponding period of the last fiscal year.

Similarly, the import of CKD cars increased by 113 percent to $733 million during July – March 2020/2021 as compared with $343.4 million in the same period of the last fiscal year.

Analysts said that import of CBU cars increased due to ease in air travel restrictions after reduction in coronavirus cases globally.

Besides, the import of CKD cars can be attributed to acceleration in domestic industrial activities after lifting of lockdown that was imposed to prevent spread of coronavirus cases.

April 17, 2021
FBR urged to revise slabs for advance tax collection on motor cars

KARACHI: Federal Board of Revenue (FBR) has been urged to revise slabs of engine capacity of motor cars to give benefit to buyers in payment of withholding tax.

Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 submitted to the FBR, said that advance tax under section 231B of Income Tax Ordinance, 2001 is collected by manufacturers on following categories:

On engine capacity 1001cc to 1300cc the advance tax is collected at Rs25,000.

While on engine capacity 1301 cc to 1600cc the advance tax is collected at Rs50,000.

OICCI recommended that as locally manufactured sedans passenger cars fall slightly above the 1300cc category the slightly higher engine capacity size results in these vehicles falling in higher tax bracket making it more expensive with higher upfront cost to customers.

Amendment should be made in the categories of vehicles mentioned in Division VII of Part IV of First Schedule as follows:

On engine capacity 1001cc to 1350cc the advance tax rate should be Rs25,000.

While on engine capacity 1351 cc to 1600cc the advance tax rate should be Rs50,000.

In its proposals for auto sector, the OICCI recommended that minimum tax rate should be reduced to 0.2 percent for authorized dealers of local vehicle manufacturers as they have high turnover and low margins.

The OICCI further said that exempt imports made under SRO 655(I)/2006 & SRO 656(I)/2006 from ACD levied vide SRO 1178 (I) 2015 and enhanced vide SROs 630 (I)/2018 and 670 (I)/2019.

Federal Excise Duty (FED) on locally manufactured vehicles should be withdrawn.

Levy of FED on locally manufactured vehicles be withdrawn by deleting the serial no. 55B of Table I of First Schedule to the Federal Excise Act, 2005 as it has resulted in significant increase of sales price of vehicles with consequential reduction in sales volume of the respective vehicle categories.

April 17, 2021
Car sales register 37pc growth in nine months

KARACHI: The sales of locally assembled cars registered 37 percent growth in first nine months (July – March) 2020/2021 owing to higher demand following ease in coronavirus restriction during the period.

According to Pakistan Automotive Manufacturers Association (PAMA) the car sales recorded 134,522 units during first nine months of the current fiscal year as compared with 98,425 units in the corresponding period of the last fiscal year.

Analysts attributed the rise in car sales to ease in restrictions related to coronavirus during the current fiscal year, which resulted in acceleration in economic activities.

According to analysts of Topline Securities, the car sales have increased by 27 percent MoM in March 2021 (highest since March 2019), taking 9MFY21 sales growth to 37 percent YoY.

The same, including Lucky Motors Corporation (KIA, non-member of PAMA), is up by around 20 percent MoM (highest since October 2018) with 9MFY21 sales growth estimated at around 46 percent YoY.

Sales are up 198 percent YoY (as reported by PAMA) in March 2021, however YoY sales growth is misleading, in their view, because of lockdowns in March last year due to COVID-19.

Indus Motor Company (INDU) sales increased the most by 53 percent MoM as the company had witnessed supply issues in Feb-2021. Sales growth was primarily driven by Hilux sales, which were up by 103 percent MoM.

New entrants in the industry, Hyundai Nishat sold 723 units in March 2021 with the inclusion of Hyundai Elantra, while Lucky Motor Corporation sold around 2,000 units, as per our channel checks.

Atlas Honda (ATLH) recorded motorbike sales of 125,030 units in March 2021, up 20 percent MoM. In 9MFY21, sales have increased by 25 percent YoY.

Tractor sales in Mar-2021 are up by 89 percent YoY and 24 percent MoM.

Millat Tractors (MTL) recorded increase of 71 percent YoY (+17 percent MoM) while Al Ghazi Tractors (AGTL) sales increased by 133 percent YoY (+40 percent MoM), respectively.

April 13, 2021

Withholding tax collection from new car registration declines by 39pc in TY2020

ISLAMABAD: The collection of withholding tax on registration of new cars has declined by around 39 percent in tax year 2020 due coronavirus pandemic that has lowered the sales of locally assembled motor vehicles.

According to details released by Federal Board of Revenue (FBR) the collection of withholding tax fell to Rs5.88 billion in tax year 2020 as compared with Rs9.58 billion in the preceding tax year.

The drastic fall in revenue collection has been attributed to lower car sales that were impacted by COVID-19 and slowdown in the economy.

The annual sales of locally assembled cars posed a decline of 53 percent during fiscal year 2019/2020. According to Pakistan Automobile Assemblers Association (PAMA), the total car sales in the country were recorded at 110,583 units during fiscal year 2019/2020 as compared with 235,229 units in the preceding fiscal year.

The provincial motor vehicle registration authorities collect withholding tax on behalf of the FBR. The withholding tax has been collected on the registration of new motor car under Section 231B of the Income Tax Ordinance, 2001.

Following rates of withholding tax under Section 231B:

S. No.	Engine capacity	Tax
(1)	(2)	(3)
1.	upto 850cc	Rs. 7,500
2.	851cc to 1000cc	Rs. 15,000
3.	1001cc to 1300cc	Rs. 25,000
4.	1301cc to 1600cc	Rs. 50,000
5.	1601cc to 1800cc	Rs. 75,000
6.	1801cc to 2000cc	Rs. 100,000
7.	2001cc to 2500cc	Rs. 150,000
8.	2501cc to 3000cc	Rs. 200,000
9.	Above 3000cc	Rs. 250,000]

The above rates are applicable for persons on the Active Taxpayers list (ATL). However, the tax rate shall be enhanced by 100 percent in case person is not on the ATL.

April 11, 2021

FBR urged to allow commercial import of used cars to end auto assemblers monopoly

KARACHI: Federal Board of Revenue (FBR) has been urged to allow commercial import of used and reconditioned cars of models up to five years old to end monopoly of local car assemblers.

Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 recommended the commercial import of used and reconditioned motor cars up to five years old.

The chamber said that during the past 40 years, assemblers of automobiles have enjoyed protective duties, exemptions and virtual monopoly in Pakistan’s automobile car market.

Contrary to initial agreements, the assemblers failed to implement deletion program up to 90 percent. Instead, they are importing CKD while they have created vendors who mostly import auto parts and supply to these assemblers.

Consequently, the so called vendor industry is only producing low quality and non-mechanical parts which is clearly visible in locally assembled cars.

So far the assemblers have only drained Pakistan’s foreign exchange reserves to the tune of billions of dollars.

Quality of automobiles produced by the assemblers is so poor that not a single unit of these cars has ever been exported to any country.

Despite such poor quality, artificial shortage is created to fetch a premium on the early delivery and allow undocumented investors to exploit genuine buyers.

The chamber said that import of reconditioned cars more than 3 years old model has been restricted to favor the assemblers and exploit the middle class people of Pakistan who can no more afford to buy even a small 660cc to 1000cc imported or local car.

Ironically, import of brand new cars of high capacity and premium brands is allowed which only benefits the elite. Middle class consumers have been deprived of their right to purchase reasonably priced used/reconditioned cars which have a better quality and safety standard than the locally assembled new vehicles.

Clearly there is an element of corruption, connivance and vested interest involved in formulating auto-policies. Unfortunately, the vested interests are also resisting to change the policy to allow import of reconditioned cars by reducing the Tariff rates and also permit import of cars of up to five year old models.

The chamber further said that enough protection has been given for decades to assemblers.

The chamber has given a comprehensive tariff plan for import of used and reconditioned cars.

April 10, 2021
Tax collection from new car manufacturing grows by 28pc

The collection of withholding income tax from the sales of new cars by manufacturers in Pakistan has seen a notable uptick, marking a 28 percent increase during the first eight months of the fiscal year 2020/2021.
(more…)

March 15, 2021
Car sales increase by 24 percent in eight months

KARACHI: The sales of locally manufactured motor cars registered an increase of 24 percent during first eight months (July – February) 2020/2021 owing to pick up in economic activity and lower policy rate.

According to data released by Pakistan Automotive Manufacturers Association (PAMA) the sales of locally manufactured motor cars increased to 113,836 units during first eight months of the current fiscal year as compared with 91,515 units in the corresponding months of the last fiscal year.

Analysts at Arif Habib Limited attributed the increase to pick up in economic activity resulting in high demand of automobiles. Further, lower policy rate also helped in growth of car sales.

A growth of 35 percent witnessed in February 2021 on year on year basis to 16,436 units when compared with 12,183 units in February 2020.

Analysts at Topline Securities said that Pak Suzuki (PSMC) has yet again successively taken the lead with a massive increase of 66 percent YoY.

The rise is primarily driven by Alto and Ravi with sales of 4,245 (+162 percent YoY) and 1,268 (106 percent YoY) units in Feb-2021, respectively.

Honda Car (HCAR) registered sales increase of 13 percent YoY, while INDU’s sales declined by 3 percent YoY.

New entrants into Pak Auto space, Hyundai Nishat sold 651 units in Feb-2021, while Lucky Motor sold ~2,500 units, as per our channel checks.

Passenger Car sales declined by 6 percent MoM in Feb-2021. The decrease in numbers has been on the back of decline in INDU sales (-20 percent MoM) largely due to seasonally high January sales and some supply-side disruptions.

Atlas Honda (ATLH) recorded motorbike sales of 104,005 units in Feb-2021, up 16 percent YoY. In 8MFY21, sales have increased by 19 percent YoY.

March 12, 2021
Commission issues notice to Hyundai Nishat Motors for deceptive marketing

ISLAMABAD: Competition Commission of Pakistan (CCP) has issued a show cause notice to M/s. Hyundai Nisha Motors Pvt Limited for explaining deceptive marketing practice for sale of its new Hyundai Tucson.

The CCP in a statement issued on Tuesday said that it had taken a suo moto notice of the advertisement published in print media and on various social media platforms publicizing the introductory price of Hyundai Tucson with a disclaimer, ‘for a limited period only.’ In these advertisements, though the introductory price was visibly printed in large font size, yet the disclaimer was not easily noticeable as it was printed much smaller font size.

Moreover, it was also brought to the CCP;s notice that the initial booking period for Hyundai Tucson with the introductory price lasted for less than 24 hours, and then the price was raised by Rs200,000. Within 24 hours of initial bookings, the company declared that all units of Tucson at the introductory price were booked and the introductory price list was removed from its website, Facebook and Instagram pages.

The CCP’s Office of Fair Trade (OFT) in its inquiry found that advertisement to be problematic in the position of the disclaimer could potentially mislead the consumers. Moreover, the advertisement left the overall impression that the company did not clearly indicate to consumers: (i) the period in which the introductory pries would apply, and (ii) the number of vehicles that were available at the price point, thereby, prima facie, violating provisions of Section 10 of the Competition Act.

On the enquiry’s recommendations, a show cause notice has been served on M/s. Hyundai Nishat Motor (Pvt) Limited company and the company has been given 14 days to respond.

CCP is mandated under the Competition Act to ensure fair competition in all spheres of commercial and economic activity to enhance economic efficiency and to protect consumers from deceptive marketing practices.

March 9, 2021
FBR collects Rs1.53 billion as withholding tax from new car sales, registration

KARACHI: The tax authorities have collected Rs1.53 billion as withholding tax from new car sales and registration during seven months (July – January) of the current fiscal year.

The Inland Revenue offices of the Federal Board of Revenue (FBR) located in Karachi have collected Rs1.53 billion as withholding tax on new car sales and registration during first seven months of the current fiscal year as compared with Rs959 million in the corresponding months of the last fiscal year, according to official statistics made available to PkRevenue.com.

Motor registration authorities and car manufacturers collect withholding tax at the time of registration and sale of new car under Section 231B of the Income Tax Ordinance, 2001 on behalf of the FBR.

The tax collection at the time of sale by manufacturers increased to Rs616 million during first seven months of the current fiscal year as compared with Rs428 million in the corresponding months of the last fiscal year, showing an increase of 44 percent.

Similarly, the tax collection at the time of registration of new cars by provincial motor vehicle registration authorities sharply increased by 70 percent to Rs914 million during first seven months of the current fiscal year as compared with Rs531 million in the corresponding period of the last fiscal year.

The sharp increase in revenue collection under this head may be attributed to revival of economic activities after relaxation in restriction that were imposed to prevent coronavirus spread.

The sale of locally manufactured cars registered an increase of 23 percent to 97,469 units during first seven months of the current fiscal year to 79,458 units in the same period of the last fiscal year.

The growth has been seen even more higher while comparing the sale on year on year basis in January 2021. The car sales posted 46 percent to 17,515 units in January 2021 as compared with 11,964 units in the same month of the last year.

February 27, 2021
Car import jumps up by 166 percent in seven months

ISLAMABAD: The import of used and old cars recorded a growth of 166 percent during first seven months (July – January) of 2020/2021 owing to significant decline in coronavirus cases and relaxation in economic activities by easing COVID lockdown.

According to data released by Pakistan Bureau of Statistics (PBS) on Wednesday, the import payment for used and old cars surged to $116 million during first seven months of the current fiscal year as compared with $43.64 million in the corresponding months of the last fiscal year.

Sources in Pakistan Customs attributed the growth in imported cars to ease in travel restriction following decline in coronavirus cases across the world and start of vaccination to cure the pandemic.

As per import policy of Pakistan every person can bring a new motor car by paying prevailing rate of duty and taxes. However, the commercial import of motor cars is not allowed.

The import of used cars is allowed under various schemes to facilitate Pakistanis living abroad. The overseas Pakistanis can bring motor cars under personal baggage, transfer of resident or gift schemes.

New vehicles can be imported into Pakistan freely by any one against payment of duty & taxes under generally applicable import procedures and requirements.

Officials in Pakistan Customs said that Pakistani nationals residing abroad including dual nationals can import old and used vehicles into Pakistan under the following 03 schemes: Personal Baggage; Gift Scheme; Transfer of Residence.

Cars not older than 03 years and other vehicles not older than 05 years can be imported under these schemes.

The structure of duty and taxes under these 03 schemes remains the same. Motorcycles and Scooters can only be imported under Transfer of Residence Scheme.

Students receiving remittance from Pakistan, non-earning members of the Pakistani nationals living abroad and those who have imported, gifted or received a vehicle in the past two years are not eligible.

The customs authorities said that all vehicles in new/used condition to be imported under transfer of residence, personal baggage or under gift scheme, the duty and taxes shall be paid out of foreign exchange arranged by Pakistan nationals themselves or local recipient supported by bank enchashment certificate showing conversion of foreign remittance to local currency, as under:

a. the remittance for payment of duty and taxes shall originate from the account of Pakistani national sending the vehicle from abroad; and

b. the remittance shall either be received in account of Pakistani national sending the vehicle from abroad or, in case, his account is non-existent or inoperative, in the account of his family.

February 18, 2021