Government to Penalize Automakers for Delayed Deliveries

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Government has decided to impose penalties on car companies who fail to deliver their automobiles within 60 days after taking the booking order. The decision which was taken on Monday in a meeting of the National Assembly Standing Committee on Industries and Production presided over by Sajid Turi, will be finalized in the upcoming budget to be applicable from July 2021.

The committee has decided to impose a fine of 3% plus Kibor (Karachi Interbank Exchange Rate) for delay in deliveries. The rate will be charged on the amount the buyer has paid. The decision is also expected to help curb the practice of ‘own-money’ on sale of new cars in Pakistan.

Related: Government to Tackle On Money/ Premium with Up to Rs 200,000 WHT

Delays in deliveries is one of the key reasons which keeps the menace of ‘own-money’ alive. Although government has taken various steps in the past including a similar 2% penalty, as well as an up to Rs 200,000 WHT on those who sell newly purchased local assembled vehicles within three months of delivery. However these measures are fruitless since no investor registers & sells the vehicle within 90 days, in fact the game is done on the first booking of ‘unregistered’ vehicles and it is usually the buyers who has already paid the own-money, to be the first to register a new vehicle.

Government to Penalize Automakers for Delayed Deliveries 1

More interestingly, when the sales of locally assembled vehicles were reduced to 53% in year 2019, local automakers were observing non-production days with plants shutdown for over 100 days in the year. It was being told that assemblers have thousands of unsold inventory at their disposal, this was followed by COVID-19 lock downs with sales coming to a complete halt. However after the resumption of economic activities, even the bulk of unsold inventory wasn’t able to reduce the demand-supply gap that has been efficiently maintained.

Related: Hefty Premium Despite Cars Sales Down by 53%

Currently, the own-money in the market ranges between Rs 300,000 to up to Rs 1,000,000 depending on the make & model of the vehicle. Whether this new clause will really push the ‘investors’ out of this game, or will be just another action meant to grace the papers, we will have to wait to find out.

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