KARACHI: Confusion has gripped the auto sector as new entrants are reimbursing customers for late delivery beyond 60 days as per Karachi Inter Offer Rate (Kibor) plus two per cent under the Auto Industry Development and Export Policy (AIDEP) 2021-2026, while existing assemblers are reimbursing the amount at Kibor plus 3pc.

To resolve the issue, the matter came up at the first meeting of the Auto Industry Development and Export Committee (AIDEC) held in the second week of this month in Islamabad at the Engineering Development Board (EDB). Late delivery and rising prices of vehicles were also discussed at the EDB meeting.

As per AIDEP 2021-2026 interventions, the EDB is nominated as secretariat to ensure resolution of consumers’ complaints received through different channels including Prime Minister Portal, Ombudsman Secretariat, Ministry of Industries and directly by the board. The complaints relate to late delivery of vehicles beyond 60 days, price increase issues and reimbursement of Kibor plus 3pc.

Auto assemblers are also required to submit bi-annual data regarding these reimbursements to the EDB by the end of October and April each year.

Customers have to wait anywhere between two months to a year

Assemblers are giving a timeframe ranging from two months to almost a year to buyers for handing over vehicles on advance booking, thus leading to huge “on money”. The assemblers are also continuously passing on the impact of high freight rates, soaring raw material prices and rupee devaluation against the dollar to the consumers.

Sources who attended the meeting said a Chinese assembler in the session highlighted that majority of assemblers were unable to deliver vehicles in time due to Covid-19 shocks to the global supply chain, shortage of semiconductor chips, increase in shipping costs, raw material prices and rupee devaluation against the dollar forcing assemblers to raise prices.

However, All Pakistan Car Dealers and Importers Association Chairman Mian Shoaib Ahmed said that if the assemblers were unable to deliver the vehicles they should not book vehicles. The increase in prices should not be transferred to the customers, he added.

Meanwhile, Indus Motor Company CEO Ali Asghar Jamali said that halting bookings would be counterproductive and result in higher premium in the market. He was of the view that the government should wait and let the market mechanism work, stressing that “things should stabilise soon”.

A representative of Hyundai Nishat attributed the delay in delivery of vehicles to international factors “which are out of control of local industry”. “New entrants are legally bound to make reimbursement in late deliveries at Kibor plus 2pc,” he added.

The AIDEC recommended that investors under the Auto Policy 2016-21, who are paying Kibor plus 2pc instead of Kibor plus 3pc, shall submit justification and legal opinion to the EDB.

The committee also asked assemblers to submit updated data on reimbursements made till February 2022. The committee recommended that the amount of advance payment threshold may be revised up to 50pc of the total vehicles’ price to curb “on money” culture.

The committee also recommended to the State Bank of Pakistan to direct conventional banks to book vehicles on partial payment instead of full payment as is provisional in the Auto Policy.

Paapam Chairman Abdul Razzak Gauhar said localisation must be targeted to attain maximum possible value-addition within Pakistan to reduce the risk of external shocks.

Techno Pak Industries’ Abdul Rahman Aizaz said the government’s decision regarding maximum upfront payment on car booking not to exceed 20pc of the invoice value has brought more investors in the market and genuine customers are suffering.

The new auto policy envisages the introduction of an online booking system in order to bring transparency. All car assembling companies will have to display booking status and tentative delivery period online on their respective websites to increase visibility and status of booking to the customers. This is already being done by some leading assemblers.

Currently, the EDB has been receiving the status of deliveries of vehicles from respective companies on a need basis. However, since the number of complaints regarding bookings and delivery of vehicles are increasing, an online, real-time reporting mechanism needs to be devised for consolidated reporting of data to customers.

The committee decided that a separate meeting with the assemblers may be conducted by the EDB to devise modalities for implementing an online reporting mechanism at the board.

Published in Dawn, March 20th, 2022