Local automakers in Pakistan have expressed deep concerns following the government’s decision to remove the regulatory duty (RD) on imported luxury vehicles.
The Pakistan Automotive Manufacturers Association (PAMA) warns that this move could result in substantial losses for the local auto industry, potentially causing a 25 percent decline in market share. PAMA estimates that the surge in luxury vehicle imports could reach 3,000 vehicles per month or 36,000 units annually.
Pakistan directs dealers to reduce car prices after regulatory duty removal
In a letter addressed to the Federal Board of Revenue (FBR), PAMA highlights the detrimental effects of this decision on the industry. The association argues that the government’s action indirectly hampers the progress of the local auto sector, while simultaneously enabling the import of luxury items, including completely built-up (CBU) vehicles, at reduced tax rates. This creates an uneven playing field for local automakers.
PAMA emphasizes that Pakistan is already facing a severe foreign exchange crunch, leading to significant challenges in the trade and industrial sectors due to the scarcity of imported goods and raw materials. With the removal of the RD, the entire auto industry in Pakistan is now teetering on the brink of a complete shutdown. This impending crisis poses a substantial risk of revenue loss for the government and raises concerns about social unrest stemming from job losses.
Local parts manufacturers will be severely impacted by the loss of locally manufactured vehicles. PAMA reveals that this shift towards imported vehicles will cause financial setbacks ranging from Rs 800,000 to Rs 1,500,000 per unit for parts suppliers. These vendors are already grappling with challenges and cannot sustain further blows to their businesses due to the volume shift away from local manufacturing.
In light of the dire consequences, PAMA urgently appeals to the government to retain the regulatory duty and implement immediate measures to support the resumption of completely knocked-down (CKD) operations in the local auto industry. The association emphasizes that these actions are crucial for safeguarding local manufacturing, particularly for parts makers who are already facing significant challenges.
The removal of regulatory duty on luxury vehicles in Pakistan has sparked serious concerns within the local auto industry. PAMA’s warning of potential market share losses, the threat of a complete industry shutdown, and the adverse impact on local parts manufacturers highlight the urgency of the situation. The government now faces the task of carefully considering these concerns and taking proactive measures to ensure the continued viability and growth of the local auto sector.
