ISLAMABAD: The auto industry has conveyed to the government that the imposition of new taxes on locally assembled cars is a deviation from the Automotive Ind­ustry Develop­ment and Export Plan (AIDEP) 2021-26.

Also, the government is not controlling the import of used cars.

In a letter to the Ministry of Indus­tries and Production, the local auto vendors and the spare parts manufacturers have said that the duties and taxes imposed recently in the mini-budget on the auto sector was unfair and could lead towards a serious crisis for the automobile assemblers as well as the vendor industry.

The government increased Federal Excise Duty (FED) to 5pc from 2.5pc on 1,001cc to 2,000cc cars and 10pc from 5pc on cars above 2,000cc.

‘Govt has failed to curb import of used vehicles’

Similarly, the government has proposed a tax on imported Hybrid cars (851cc to 1,800cc) that will increase to 12.5pc from 8.5pc and tax on import of electric vehicles (EVs) in CBU conditions will increase from 5pc to 17pc.

“The auto sector is a long-term based industry and needs stable policies but the government has deviated from the official policies,” Syed Muhammad Ishtiaq, CEO S.M. Engineering, told media persons on Thursday.

He added that the industry has demanded the government to stick to the AIDEP and refrain from changing it after intervals, as it creates a lack of trust between the investors and the country.

“But at the same time the issue of importing used car was gaining momentum and that too needs immediate attention from the authorities,” Mr Ishtiaq said, adding that last year alone over 27,000 vehicles were imported, blatantly misusing the gift and baggage schemes and depriving the economy of foreign exchange.

He said that the auto sector has forwarded the request to the government that despite high imports the duties on used cars have not been increased.

“The low duties on import of used vehicles will encourage the exploiters to further dent the economy and discourage investments in the local industry,” he added.

He shared the official data showing that in the last 10 years, around 400,000 used vehicles have been imported capturing a major chunk of the market.

He said that the surging import of used cars is to some extent responsible for the closure of plants of Hyundai, Nissan, Chevrolet, Fiat and Adam previously.

“We are already facing the brunt of rupee devaluation and additional duties, while the misuse of imported used cars schemes will be very detrimental for the industry,” Mr Ishtiaq said.

Published in Dawn, February 4th, 2022