KARACHI: The vacuum created by the absence of local assembling of below-800cc cars in Pakistan is being filled by higher imports of small cars.

Small cars constituted almost half of the total imports of used cars in July-August, latest data shows.

Fascinating colours and designs, airbags, central locking, power windows, air conditioners and, above all, the automatic option are some of the features that make buyers go wild about these cars.

With the availability of only Suzuki Mehran in the locally produced 800cc segment, consumers have shown increased interest in imported vehicles of below-800cc and 800-1,000cc categories.

Imports of total used cars surged 32.6 per cent to 8,476 units in July-August from 6,390 units in the same period of the last fiscal year. Below-800cc cars, cargo vans, pickups and jeeps hold a big share in the total imports of used vehicles, statistics show. Their imports clocked up at 4,417 units in July-August, up 70.2pc from 2,595 units in the comparable period of the preceding year.

As many as 1,584 used cars in the 800-1,000cc category hit the roads in July-August, up 15pc from 1,377 units imported a year ago.

In the 1,500-1,800cc category, 1,549 units arrived in July-August, which shows an annual increase of 4.7pc over 1,479 units imported one year ago. Imports of above-1,800cc vehicles saw a decline to 2.9pc year-on-year to 912 units in July-August.

With no sign of the beginning of the local assembly in the below-800cc category, car imports are expected to thrive given their rising demand, All Pakistan Motor Dealers Association (APMDA) Chairman H M Shahzad said. Consumers have shown tremendous response to smaller imported cars, as 660cc vehicles are highly popular, he said.

“The share of used car imports in the 660-1,000cc segment in total imports is 80-85pc. Their safety features and the automatic option lure buyers,” he said.

He said the government should allow the commercial import of used cars in the below-800cc category, as these cars are not being assembled in Pakistan. These cars do not need the CNG option, as their average petrol consumption is 18-22 kilometres per litre, he added.

On the contrary, Pakistan Automobiles Assemblers Dealer Association (Pamada) Chairman Iqbal Shah urged the government to control the misuse of used car import schemes in the country.

The government should probe the misuse of baggage and gift schemes for the import of used cars, he said while talking to Dawn. Calling them the biggest impediment to new investment, he said the misuse is causing huge losses to the national kitty.

More than 54,000 units were imported in 2015-16 compared to 30,000 units in the preceding year, he said, adding that over 300,000 vehicles were imported in the last 10 years. This has captured a big chunk of the market besides causing the closure of plants of Hyundai, Nissan, Chevrolet, Fiat and Adam, Mr Shah said.

At an average unit value of Rs1.5 million, this activity has generated the grey economy of over Rs80 billion in 2015 alone, he noted.

Another problem, Mr Shah stated, is that the customs levies on second-hand vehicles are not imposed ad valorem, which means levying taxes in proportion to the estimated value of the imported units. In contrast, a fixed dollar amount has been notified under SRO-577, which includes custom duties, sales tax and withholding taxes on an arbitrary basis, according to the Pamada chairman.

These fixed duties are “highly suppressed” and are causing a loss of tax revenue to the government, he said. This also effectively subsidises imported used cars while damaging the domestic auto industry. These fixed duties are calculated on less than half the current market price of the imported cars, he said, adding that these are based on the monetary values set in 2005.

In response, Mr Shahzad of APMDA said car imports are on the rise under the import policy and regulations set by the government. “The government knows very well what options people are getting,” he added.

He said the local industry and Pamada chief were critical of used car imports, although the sale of locally produced vehicles jumped almost 20% year-on-year to 181,145 units in 2015-2016 despite huge imports. Sales continue to remain strong for many models, like Corolla, Civic, City, WagonR, Swift and Mehran, in July-August, he said.

Mr Shahzad criticised Pamada for not speaking up against “outdated” models of the 1980s, such as Suzuki Mehran, Ravi and Bolan, in addition to 15-year-old Cultus, which are not manufactured in any part of the world except Pakistan.

The APMDA chief said the prices of locally produced vehicles are increased upon a minimal appreciation in the Japanese currency, but car prices stay flat when the yen loses its value against the rupee. “What benefit have they given consumers following the 16pc decline in steel prices from January 2015 to July 2016?” he asked.

The yen depreciated by 19pc in 2014 against the rupee and 14pc against the dollar. However, in the first half of 2015, the yen became stronger by 4pc against the rupee and remained flat against the dollar. In the first half of 2016, the Japanese currency gained 14pc against the rupee and the dollar.

The high demand for locally produced vehicles pushed up the import of completely and semi-knocked down (CKD/SKD) kits by 25pc year-on-year in July-August to $102.5 million. The import bill of kits in 2015-2016 reached $523m, up 8.2pc from $483m in 2014-2015.

The sale of locally produced vehicles decreased 6.3pc to 27,317 units in July-August on an annual basis mainly because of an end to the delivery of Suzuki Bolan under the Punjab Taxi Scheme.

Published in Dawn September 25th, 2016