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Saturday, May 25, 2024

Auto industry calls for higher taxes on imported used cars

CEO of Indus Motor Company advocates for increased taxes on imported used cars to bolster Pakistan's auto industry, proposing measures to stabilize production and promote local manufacturing amid economic growth.

Ali Asghar Jamali, CEO of Indus Motor Company (IMC), has advocated for increased taxes on used imported cars to support Pakistan’s local auto industry. In meetings with the Federal Minister for Finance, the Industries Minister, and the Federal Board of Revenue (FBR) chairman, Jamali proposed this tax hike for the upcoming budget. He argued that higher duties on imported used vehicles would benefit local manufacturers amid improving economic activity, a stable currency, and potential interest rate cuts.

IMC has recently faced significant challenges, including a 58% decline in sales during the first half of 2023. Jamali believes that reducing the influx of used imported cars would enable local manufacturers to regain market share and stabilize production, expanding from 275,000 to 500,000 units annually.

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Furthermore, Jamali has promoted hybrid electric vehicles (HEVs) as a sustainable solution to Pakistan’s economic and environmental issues. IMC has invested $100 million in local HEV production, with plans to launch the Corolla Cross, Pakistan’s first locally manufactured hybrid SUV. He emphasized that HEVs could help reduce carbon emissions and lower the country’s import bill, aligning with global trends towards vehicle electrification.

Despite expectations for increased demand for local cars starting January 2024, the anticipated growth was hampered by a surge in imported used cars. Although local car sales saw a modest 28% improvement, the import of used cars spiked by over 711% in February compared to the same period last year. Jamali warned that if this trend continued, it could force the closure of the vendors’ industry.

Highlighting the economic impact, Jamali noted that the local auto industry has invested approximately $2.5 billion and contributed around Rs400 billion in taxes during FY2022. The industry also provides about 2.5 million direct and indirect jobs. He cited the satisfactory performance of the newly launched Toyota Corolla Cross in its first quarter, which features over 50% localized parts, the highest in its category.

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Jamali asserted that accepting the auto industry’s proposals could help increase FBR revenue by Rs80 billion, further supporting the local economy and ensuring the sustainability of the auto sector.