Local auto assemblers said it is highly unlikely that a recent hike in GST would additionally generate revenue of Rs 4 billion. The measure would only hit the economy, enhancing negative sentiments for the consumers and losing investors’ confidence in Pakistan, according to the Pakistan Automotive Manufacturers Association (PAMA) Director General Abdul Waheed Khan, who informed caretaker Finance Minister Dr Shamshad Akhtar through a letter.
The Economic Coordination Committee (ECC) recently decided to increase the general sales tax to 25% on locally assembled vehicles of 1,400cc or priced at Rs 4 million, anticipating the move will bring in more revenue to the government kitty. However, PAMA says the measure would only hit the economy, enhancing negative sentiments for the consumers and losing investors’ confidence in Pakistan.
Related: 25% Sales Tax Slapped on Local Assembled Vehicles
Interestingly, PAMA once again released its anger on imported used cars stating that the government has kept the taxes unchanged on imported used cars, thus making a case for negative protection to locally assembled vehicles. According to PAMA, the used cars have managed to fill the market vacated by locally assembled vehicles, and the share of used cars has gone up to 30% causing a loss of foreign exchange and legitimate revenue to the government.
For local assemblers, the low number of imported used automobiles has always felt like a needle in the eye. Consider PAMA to be a housewife who is never able to meet the demands of her home but is constantly jealous of the neighbor, blaming her for all of the challenges she faces in her house, including her husband getting attracted to the gorgeous neighbor. But, as stubborn as she is, she is unwilling to provide for her home what her neighbor does.
Related: Why JDM Cars Are Considered a Threat to Local Assembled Ones
As a matter of fact, used cars without any warranty or after-sales support are popular among consumers because local assemblers have turned a blind eye to offering affordable & fuel-efficient small cars with decent equipment & safety features on offer. We have discussed these factors a number of times already. Therefore, PAMA alone is to blame for the void rather than any other factor.
What’s worse, PAMA fears a sales drop of up to 60% in locally assembled vehicles in the coming months given the price hike on account of the increased GST which will make buyers further reluctant to purchase locally assembled new vehicles. Not to mention the sector is already witnessing lowest-ever sales with the figures falling to the 20-year-old levels.
Related: How Can Car Sales Improve in Pakistan?
In these toughest times, PAMA member companies whether old players or newcomers, continue to launch super expensive cars for the elites rather than focusing on generation volumes. As a reminder, sales of locally assembled passenger cars were 49,990 in the first 7 months of the current fiscal year, down 48% from 95,240 in the same period of the previous fiscal year, FY23.
PAMA should be reminded that no imported used car ever competes against any expensive crossovers, SUVs, or sedans offered by local assemblers. The majority of used cars are either 660cc JDM kei cars or small hatchbacks which are not even in the plans of local assemblers to be introduced in the market.
A computer animation professional with over 23 years of industry experience having served in leading organizations, TV channels & production facilities in Pakistan. An avid car enthusiast and petrolhead with an affection to deliver quality content to help shape opinions. Formerly written for PakWheels as well as major publications including Dawn. Founder of CarSpiritPK.com
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