Japanese special ship for exporting cars to Pakistan
By Arshad Hussain
KARACHI: Japanese dealers and the authorities are planning to hire special vessels to meet the rising demand for cars from Pakistani dealers, industry sources said.
Japanese car dealers have been receiving huge orders from Pakistan after the federal government announced incentives for local car dealers under the gift and luggage schemes.
Japanese car dealers are finding it hard to arrange shipments for the transportation of used vehicles to Pakistan, but the industry source said the import of vehicles would rise by August and September this year. The Japanese automobile industry is considered to be the largest automotive market in central Asia. Car dealers are booking small used vehicles in Japan as prices are much lower than in other parts of the world.
During the month of July, dealers imported around 900 used cars, while car companies imported only 45 new brand units. The import of used cars was between 200 and 250 units in July 2004.
All Pakistan Motor Dealers Association (APMDA) Chairman H M Shahzad said: “The association has assured the federal government that it will import 30,000 to 35,000 used cars in the current fiscal year. This is the first time that dealers are thinking about importing small cars only,” he added.
In the previous fiscal year, local dealers imported around 13,700 used vehicles but most of the vehicles had engines over 1300cc.
“Out of the 900 vehicles imported in July, almost half of the vehicles are below 1300cc power engines,” the chairman said. “Local dealers booked around 1,500 to 2,000 cars that are expected to arrive in Karachi in August and September,” he added.
A local dealer said very few vessels were coming to Pakistan from Japan and the importers of used cars were facing booking problems for transportation.
The incentives, given by the commerce ministry in the recently announced trade policy, has further reduced the cost of importing used vehicles. “Three-year old cars will save the importer of the vehicle between Rs 100,000 and Rs 200,000,” the dealer said. According to a rough estimate, the price of a 1300cc power engine car in 2003 was approximately Rs 980,917 but under the three-year scheme a 1300cc vehicle can now be imported for Rs 857,669.
Similarly, the price of a 2003 model of a 1500cc power engine car was Rs 1.23 million, but a 2002 model will now be available for Rs 1.053 million. A 2003 model of a 1200cc engine car was available for Rs 818,439 but a 2002 model will now be available for around Rs 739,352.
The total cost of a 2003 model 1000cc engine car was Rs 827,868 but under the new scheme a 2002 model of a 1000cc car can now be purchased at a price of Rs 719,730. “Car sales have gone up by 44 percent during 2002- 2005,” said Faraz Farooq, an analyst at Jahangir Siddiqui and Co. This growth is mainly due to cheap and extensive car financing schemes, rising remittances and increases in consumer wealth due to the economic turnaround, he added.
The increase in the demand for cars started after the announcement of the 2005-06 fiscal year budget when the government reduced import duties on complete built units (CBUs) in an effort to meet local demand by reducing delivery time and eliminating premiums on instant delivery. The reduction was made on upper segment cars while duties on cars up to 1300cc were unaltered.
On 1600cc cars a 5 percent duty reduction was made while the duty on cars above 1800cc was reduced by 25 percent.
In the 2005-06 budget, the rate of depreciation on the import of used cars below 1800cc was increased from 1 percent to 2 percent per month subject to a maximum of 50 percent. In the recently announced Trade Policy 2005-06, a further relaxation was allowed on the import of used cars by overseas Pakistanis under gift, baggage and transfer of residence schemes. Now up to three-year-old cars can also be imported under the gift and personal baggage schemes.
Local car assemblers will be unaffected by the duty amendment on CBUs as the duty structure of popular models (with engine capacity up to 1300cc) has remained unchanged,” said Farooq.
“Out of the 127,000 cars sold locally during 2004-05, the share of cars up to 1300cc engine capacity was about 85 percent. With car assemblers increasing their production capacity, car sales are likely to touch 150,000 (an increase of 18 percent) in 2005-06.
The analyst predicted that the import of used cars would increase to 15000-20000 in 2005-06. But this will not affect local assemblers because the demand supply gap is huge and will take a few years to bridge.