ISLAMABAD: The Fed­eral Cabinet has directed the Ministry of Industries to inquire into the production capacity of existing car makers, alleging that they have failed to increase their output as per the market dem­and resulting in overcharging and increase in prices of locally-assembled cars.

The minutes of the meeting held on Tuesday (Dec 29) stated that the “the cabinet directed the Minister of Industries and Production to look into the reasons as to why the foreign automobile manufacturers in Pakistan defaulted on indigenisation of motor vehicle manufacturing through deletion programme and make a presentation to the cabinet.”

Meanwhile, sources said that Prime Minister Imran Khan asked Industries Minister Hammad Azhar to look into why the three main auto companies that have been doing their business in the country for up to four decades were failing to localise manufacturing of spare parts and they were still importing majority of parts.

The issue was taken up after some ministers complained to the prime minister that the shortfall in the supply of locally assembled cars was leading to black marketing and the dealers were charging premium or ‘on- money’ for immediate delivery.

A senior official of the Ministry of Industries told Dawn that the demand for vehicles has increased after import of used vehicles has been restricted as strict conditions have been imposed. For their part industry players blame the government for delays in decision making.

“The industry has been demanding from the government to introduce taxes on resale of new vehicles within 90 days of first purchase — this will discourage the on-money as it will make the car too expensive for resale,” said a senior official in one of the auto makers, and added that the government has yet to formally issue an ordinance in this regard.

PM asks industries minister to find out why shortfall in vehicle supply persists

On the issue of localisation Chief Executive Officer of Indus Motor Ali Asghar Jamali said that all the authorities including the industries ministry was aware of the investments and efforts to promote localisation done by Toyota Pakistan as well as other companies.

He added that the fresh round of negotiations with the government were scheduled to start in near future over the new Auto Policy as the existing expires on June 30, 2021.

Mr Jamali said the issues related to prices of locally-assembled and manufactured vehicles, premium money as well as localisation were the main agenda items to be discussed in this round.

Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Chairman Abdul Rehman said that up to 65pc parts in various cars were locally made and this can be enhanced to 80pc. “But it needs coordinated efforts by all stakeholders, besides the government has to maintain its policies over a long period to ensure the confidence of investors to establish the industries.”

At the same time, he added that 100pc localisation was not the case even in Japan and Germany, because of various factors such as economies of scale, international trade requirements and presence of technical expertise.

Published in Dawn, January 1st, 2021