Karachi, September 11, 2024 – Indus Motor Company Limited (IMC), a key player in Pakistan’s automotive sector, has called on the government to reduce tax rates on the corporate sector and vehicles to stimulate growth and enhance industry competitiveness.
In its annual report for the fiscal year ending June 30, 2024, IMC Chairman Mohamedali R. Habib highlighted the challenges the automotive industry faced due to economic contraction, tax burdens, and external market pressures.
Habib noted that the first half of the fiscal year was marked by a broad-based economic slowdown, which adversely affected various sectors, including the automotive industry. Despite these headwinds, IMC adapted its strategies to navigate the evolving market conditions. However, he emphasized the urgent need for government intervention to foster a more supportive business environment, particularly in terms of tax policies.
Tax Disparity and Market Challenges
The IMC chairman outlined a significant issue: the disparity in duties between locally manufactured and imported vehicles. While import duties on Completely Built Units (CBU) vehicles provided some protection for local manufacturers, a simultaneous increase in taxes on locally produced vehicles—up to 50% of the total cost—hindered the industry’s ability to serve a diverse customer base.
“These high taxes stifled our growth potential,” Habib explained, adding that while the used imported car segment experienced a surge in demand, the domestic industry struggled to compete. This growth in used car imports was driven in part by the expiration of the Regulatory Duty (SRO) in March 2023 and the depreciation of the Japanese Yen against the US Dollar, which made these vehicles more affordable.
Appeal for a Business-Friendly Environment
In the report, IMC expressed appreciation for the government’s rationalization of the duty structure on used vehicle imports through the Finance Act 2024. However, the company urged further reforms, including tax reductions on locally manufactured vehicles and across the corporate sector, to improve product affordability and allow the industry to operate at full capacity.
IMC also advocated for the promotion of Hybrid Electric Vehicles (HEVs) as part of a broader strategy to reduce fuel consumption and promote sustainable development. The company’s launch of the Toyota Corolla Cross, Pakistan’s first hybrid electric vehicle with the highest localized content, demonstrated its commitment to this vision. The vehicle received positive feedback for its fuel efficiency and environmental benefits, aligning with government initiatives for cleaner, more efficient transport options.
Currency Volatility and Skill Development
The fiscal year was also marked by currency volatility, which strained the industry. Fluctuations in the Pakistani Rupee (PKR), influenced by domestic and global market dynamics, made it challenging for IMC to maintain production volumes. However, stabilization efforts by the central bank in the latter part of the year, including interest rate adjustments and measures to bolster foreign exchange reserves, provided some relief.
Despite these challenges, IMC continued to invest in skill development. The company participated in Toyota Motor Corporation’s Global Skill Up Training (GST) program, sending 126 employees to Japan for extensive training. This initiative, which will expand to 200 new trainees in the coming fiscal year, aims to enhance IMC’s operational capabilities and contribute to Pakistan’s professional workforce.
Looking Ahead
As the automotive sector anticipates further government support, IMC remains optimistic about its future. The company has commenced exports to Oceania, marking a significant milestone in expanding its market presence beyond Pakistan.
Chairman Habib concluded the report by reiterating the company’s appeal for tax reductions. “With business-friendly policies, the industry can achieve sustainable growth, job creation, and technological advancement, contributing to Pakistan’s overall economic development,” he said. IMC remains committed to delivering high-quality vehicles and playing its part in the progress of the automotive industry and the broader economy.
