Auto policy approved, door wide open for new entrant

[Edevelop]

ISLAMABAD: In the hope of attracting a European carmaker, the government on Friday approved a new automobile policy, which offers tax incentives to new entrants to help them establish manufacturing units and compete effectively with the three well-entrenched assemblers.

After a hiatus of almost two and a half years, the Economic Coordination Committee (ECC) of the cabinet gave the go-ahead to the Automotive Development Policy 2016-21, according to an announcement made by the Ministry of Finance.

However, the government did not change its policy for used car imports, leaving consumers with a narrow range of choice until new brands of good quality are produced in the domestic market.

The Federal Board of Revenue had proposed that import of up to five-year-old used cars should be allowed compared to the current three-year ceiling. It also called for opening imports for commercial purposes.

The automotive policy will be formally launched on Monday. Industries and Production Minister Ghulam Murtaza Jatoi did not attend the ECC meeting.

“The existing three car manufacturers will not be entitled to the benefits that are being offered to the new investors,” said Miftah Ismail, Chairman of the Board of Investment, while talking to The Express Tribune.

The policy was aimed at enhancing consumer welfare and boosting competition besides attracting new players, he added.

Ismail said greater localisation of auto parts had been ensured in the policy and in case the new entrants were unable to achieve the targets, they would be penalised.

Contrary to the demand of Volkswagen, the definition of medium knocked-down unit has been removed from the policy. The government desires that Fiat, Audi or Volkswagen should establish its plant in the country.

The definition of new investor has again been changed to deny certain benefits to the existing auto players.

Greenfield is now defined as “installation of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles of make not already being manufactured in Pakistan.”

The government has included the word ‘make’ and deleted the word ‘assembled’. It has defined ‘make’ as “any vehicle of whatever variant produced by the same manufacturer.”

Incentives

The government has allowed one-off duty-free import of plant and machinery for setting up an assembly and manufacturing facility. It has also permitted import of 100 vehicles of the same variants in the form of completely built units (CBUs) at 50% of the prevailing duty for test marketing after the groundbreaking of the project.

A major incentive for the new investors is the reduced 10% customs duty on non-localised parts for five years against the prevailing 32.5%. For existing investors, the duty will be slashed by 2.5% to 30% from the new fiscal year 2016-17.

Similarly, localised parts can be imported by the new entrants at 25% duty compared to the current 50% for five years. For existing players, the duty on import of localised parts will be brought down to 45% from the new fiscal year, beginning July.

In the CBU category, customs duty on cars up to 1,800cc engine capacity has been reduced by 10% for two years – 2017-18 and 2018-19. This will be applicable to the existing players as well and will encourage reduction in car prices.

A single duty rate will be applied to the localised and non-localised parts after five years of the new policy. The present duty structure will continue for seven years for the new investors.

The Board of Investment will provide a single point of contact for all new investors. They will be required to submit a detailed business plan and relevant documents to the Engineering Development Board (EDB) for assessment.

The Ministry of Industries, on recommendation of the EDB, will approve the new investor under the relevant category.

Sick unit revival

The non-localised parts can be imported at 10% and localised parts at 25% duty for three years for the revival of a sick unit.

 

[ziaulislam]

good news and a bit confusing..the policy is too rigid this might not allow new players as it would nt be easy for new player to risk a large investment before knowing that its model will succeed
so removing assembling is a blessing in disguise for current palyers

 

[Salik]

There is no precise target e.g. if we invite TATA Nano to meet middle and lower middle class's requirement, it will show there's an objective to meet in certain time period.

 

[S.Y.A]

A major incentive for the new investors is the reduced 10% customs duty on non-localised parts for five years against the prevailing 32.5%

10% of 32.5% has been reduced, or it has been brought down by 10% i.e reduced to 22.5% ? because 10% of the existing duty is not much of an incentive.

good news and a bit confusing..the policy is too rigid this might not allow new players as it would nt be easy for new player to risk a large investment before knowing that its model will succeed
so removing assembling is a blessing in disguise for current palyers

if a European company sells cars in the range of 1300-1800cc with a similar price tag as that of the japanese, I dont think anyone will be mad enough to go for the japanese makes.

wishful thinking, but I hope Audi and BMW jump in too.

 

[Path-Finder]

There is no precise target e.g. if we invite TATA Nano to meet middle and lower middle class's requirement, it will show there's an objective to meet in certain time period.

Why in Gods name do we want tata in Pakistan?

if a European company sells cars in the range of 1300-1800cc with a similar price tag as that of the japanese, I dont think anyone will be mad enough to go for the japanese makes.

wishful thinking, but I hope Audi and BMW jump in too.

1300-1800cc is a possibility but one thing to contend with is spare parts for european cars are very expensive some cars require special tools as well and computers to repair them. so mechanic training would be required as well.

 

[!eon]

if a European company sells cars in the range of 1300-1800cc with a similar price tag as that of the japanese, I dont think anyone will be mad enough to go for the japanese makes.

wishful thinking, but I hope Audi and BMW jump in too.

Japanese cars are not that bad in international market. It's in Pakistan they are coming with low quality tin packs.

1300-1800cc is a possibility but one thing to contend with is spare parts for european cars are very expensive some cars require special tools as well and computers to repair them. so mechanic training would be required as well.

Parts are expensive in Europe because repair is discouraged, of course silently to facilitate auto industry. Same spare parts are not that expensive in rest of the world.

 

[haviZsultan]

Why in Gods name do we want tata in Pakistan?


1300-1800cc is a possibility but one thing to contend with is spare parts for european cars are very expensive some cars require special tools as well and computers to repair them. so mechanic training would be required as well.

We don't need TATA but it is obvious that the Indian transport sector has done far better than Pakistans with a wide variety. I visited Lucknow some years ago but I still remember that even this deprived city of oppressed Muslims (we live in a slum called chawk) had much more choice and was much more colourful in the vehicle market. They have all sorts of makes and models of cars while we are stuck with a few old cars which are now obsolete in each and every developed country. Imagine junk and unsafe cars such as Mehran being on the street.

We need to learn from their auto policy if not anything else.

 

[Path-Finder]

Japanese cars are not that bad in international market. It's in Pakistan they are coming with low quality tin packs.



Parts are expensive in Europe because repair is discouraged, of course silently to facilitate auto industry. Same spare parts are not that expensive in rest of the world.

My dads VW had a water pump issue and the engine requires special tools which had to be purchased from VW. some German cars do require special tools. plus more importantly there is no technical college that teaches the trade. Would you trust you BMW Audi Merc to a un qualified mechanic?

We don't need TATA but it is obvious that the Indian transport sector has done far better than Pakistans with a wide variety. I visited Lucknow some years ago but I still remember that even this deprived city of oppressed Muslims (we live in a slum called chawk) had much more choice and was much more colourful in the vehicle market. They have all sorts of makes and models of cars while we are stuck with a few old cars which are now obsolete in each and every developed country. Imagine junk and unsafe cars such as Mehran being on the street.

We need to learn from their auto policy if not anything else.

I completely understand what you are saying but its our Gov that dictates a Auto policy in the country. But it has been the Automakers that dictated the Gov on it. about time someone told these Japs to provide a good standard or take a hike permanently.

 

[muhammadali233]

There is no precise target e.g. if we invite TATA Nano to meet middle and lower middle class's requirement, it will show there's an objective to meet in certain time period.

no tata please,cars are prone to catch fire and when they crash even a little bit it folds like a wet tissue
tata nano for example scored zero stars in NCAP whereas another small car Mercedes smart scored 4 stars

 

[koolio]

They should have done this long time ago, Pakistani cars are made of shit quality with 1980's technology and the dealers are charging at extortionate rates for what the cars are worth, More competition will mean better quality cars and better affordability.

 

[!eon]

My dads VW had a water pump issue and the engine requires special tools which had to be purchased from VW. some German cars do require special tools. plus more importantly there is no technical college that teaches the trade. Would you trust you BMW Audi Merc to a un qualified mechanic?


I completely understand what you are saying but its our Gov that dictates a Auto policy in the country. But it has been the Automakers that dictated the Gov on it. about time someone told these Japs to provide a good standard or take a hike permanently.

Trained mechanics are needed for even any modern car. Imported japanese also have problems degrading repair issues in Pakistan.
BTW which VW model is that ?

 

[Path-Finder]

Trained mechanics are needed for even any modern car. Imported japanese also have problems degrading repair issues in Pakistan.
BTW which VW model is that ?

its a 2005 2.5TDi Caravelle its a engine that uses cogs or gears instead of a belt.

 

[!eon]

its a 2005 2.5TDi Caravelle its a engine that uses cogs or gears instead of a belt.

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[Curious_Guy]

May Allah bless these people who want to bring new players in this market !

 

[ziaulislam]

10% of 32.5% has been reduced, or it has been brought down by 10% i.e reduced to 22.5% ? because 10% of the existing duty is not much of an incentive.


if a European company sells cars in the range of 1300-1800cc with a similar price tag as that of the japanese, I dont think anyone will be mad enough to go for the japanese makes.

wishful thinking, but I hope Audi and BMW jump in too.

look kia failed and left...there are no grantees