Record foreign exchange spending on new automobiles

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KARACHI: Pakistan has witnessed record foreign exchange spending on highest-ever arrival of new automobiles in 2020-21 on strong demand followed by revival of used vehicles imports.

The country imported record 10,513 units of new cars, jeeps, vans, pickups, two-wheelers and buses in FY21 compared to 1,680 units in FY20, 3,716 units in FY19 and 7,424 units in FY18.

Besides, for the first time, 390 new electric vehicles (EVs) and 19 used EVs were also imported in FY21.

Entry of new players from Korea and China in the local assembly of new models coupled with low interest rates have injected new life in the auto sector while used imported vehicles and locally assembled vehicles by old players also enjoy robust demand.

In FY21, new cars and jeeps held the highest share with 10,157 units compared to just 893 units in FY20, 2,427 in FY19 and 3,758 units in FY18.

In overall automobile imports of around $2 billion, the import bill of completely and semi-knocked down (CKD/SKD) kits for cars, bikes and heavy vehicles stood at record $1.6bn in FY21 as compared to $727m in FY20 while $386m was spent for import of used and new vehicles in FY21 as compared to $219m in FY20.

In the first two months of the current financial year (2MFY22), import of CKD/SKD kits for local assembly of all vehicles swelled by 214pc to $369m from $117m in the same period last fiscal year, while import of completely built up units (CBU) posted a growth of 118pc to $103m from $47m in 2MFY22.

In personal baggage scheme, import of used cars, jeeps, vans and pickups swelled to 29,276 units in FY21 from 16,455 units in FY20 though it was 49,990 units in FY19 and 73,640 units in FY18, said All-Pakistan Motor Dealers Association (APMDA) Chairman H.M. Shahzad.

He said majority of used vehicles had arrived under personal baggage scheme and only 946 motorcycles/scooters had landed under transfer of residence scheme from FY18 to FY21.

Asked why import of used cars and jeeps recharged in FY21 after facing a lacklustre trend in FY20, Mr Shahzad said importers took time to understand the government decision of curbing used car imports and they resumed imports especially of used cars up to 1,000cc in FY21 as compared to FY20.

The government in import policy order 2017 had made it mandatory that all the vehicles (new and used) to be imported under various schemes – the duty shall be paid out of the foreign exchange arranged by Pakistani nationals themselves or local recipient supported by bank encashment certificate showing conversion of foreign remittance to local currency.

The remittance for payment of duties and taxes shall originate from the account of a Pakistani national sending the vehicle from abroad and the remittance shall either be received in the account of a Pakistani national sending the vehicle from abroad or in case his account is nonexistent or inoperative in the account of his family, according to the policy.

Imports by new and old entrants have shown a marked increase as existing assemblers have also imported new vehicles.

Amid revival in used car imports followed by all-time high import of new vehicles in FY21, the share of importing CKD/SKD kits for the local assembly of various vehicles is still above 80pc compared to 20pc share of import of used and new vehicles.

Market people cautiously see towards a new Chinese investor whose huge arrival of completely built up (CBU) units has changed the dynamics of official figures of new imported vehicles, followed by thriving commercial imports of high-end electric vehicles after duty cut in budget FY22.

Market sources said MG HS vehicles caused a stir in the auto market with delivery of 7,000 units to the buyers from November 2020 till date while around 1,000 units were still parked at the port.

New entrants before going towards the assembly line have been allowed by the government under Auto Policy 2016-21 to import 100 units per variant to test the market. But the massive import bill suggests that commercial imports by some specific models have enjoyed an edge. In previous years, the official figures used to dominate by an influx of used cars.

Market sources said that electric vehicles like Audi Etron had also arrived after a duty cut that resulted in its price reduction.

The sources said many new entrants had not brought imported vehicles in larger numbers as they were allowed 100 units per variant under Auto Policy 2016-21 before the start of local assembly.

A leading Korean vehicle assembler said it imported a minimum of five to six units to a maximum of 50 units of different variants ahead of the start of local assembly.

Pakistan has seen obsolete technologies and engines in the last three decades, followed by non-compliant emission standards. Suzuki Mehran existed for over 30 years without any model change followed by a 12-year journey of particular shape and design in other models. These high priced and outdated models also failed to compete in export markets, the new entrant observed.

Local industry and their vendors have been relying on imported raw materials, sheet metal, raisin, plastic materials, chemicals etc.

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