Pakistan saw record foreign exchange spending due to strong demand for new automobiles. The country witnessed the highest-ever arrival of New imported cars in Pakistan 2020-21 followed by resumption of used vehicles imports.

The imports were recorded at 10,513 units of new cars, vans, jeeps, pickups, buses and two-wheelers in FY21  against 1,680, 3,716 and 7,424 units in FY20, FY19 and FY18 respectively.

This is the first time 390 new electric vehicles (EVs) and 19 used EVs have also been imported in FY21.

The introduction of new Korean and Chinese players in the local assembly of new models in addition to low-interest rates have given a fresh boost to the auto sector. Similarly, used imported vehicles and locally assembled vehicles by old players are also experiencing robust demand.

During FY21, new cars and jeeps had the highest share with 10,157 units in comparison to only 893, 2,427, and 3,758 units in FY20, FY19, and FY18 respectively.

Out of the total automobile imports worth nearly $2 billion, the import bill of completely and semi-knocked down (CKD/SKD) kits for cars, heavy vehicles and bikes contributed a record $1.6bn in FY21 in comparison to $727m in FY20 while $386m was used for import of new and used vehicles in FY21 against  $219m in FY20.

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

Chairman of All-Pakistan Motor Dealers Association (APMDA ) H.M. Shahzad said that as part of the personal baggage scheme, import of used cars, vans, jeeps, and pickups rose 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)

New vehicles thrive

He added that most of the used vehicles had landed under the personal baggage scheme and only 946 scooters/motorbikes had arrived under the transfer of residence scheme from FY18 to FY21.

While answering a question as to why import of used jeeps and cars recharged in FY21 following a lackluster trend in FY20, Shahzad explained that importers took time to adjust to the government decision of curtailing used car imports. The importers have resumed imports of used cars up to 1,000cc in FY21 compared to FY20.

The import policy order 2017 issued by the government made it mandatory for all vehicles (new and used) to be imported under different schemes. The duty should be paid out of the foreign exchange arranged by Pakistani nationals themselves or local recipients supported by bank encashment certificate showing conversion of foreign remittance to local currency.

Imports by new and old entrants have increased drastically as existing assemblers also import new vehicles.

In the midst of the revival in used car imports followed by record-high import of new vehicles in FY21, the share of importing CKD/SKD kits for the local assembly of various vehicles remains over 80pc compared to 20pc share of import of used and new vehicles.

Market participants are keeping an eye on a new Chinese investor whose huge arrival of completely built-up (CBU) units has contributed to changing the dynamics of official figures related to new imported vehicles, followed by booming commercial imports of high-end electric vehicles after duty cut in budget FY22.

Market sources reported that MG HS vehicles created a change in the auto market as it delivered 7,000 units to the buyers from November 2020 till now. Nearly 1,000 units were still parked at the port.

 The Auto Policy 2016-21 allows new entrants to import 100 units per variant to test the market before moving towards the assembly line. However, the huge import bill shows that commercial imports by a few specific models have thrived. In the past, the official figures used to be dominated by an influx of used cars.

Autoparts being localized

According to a new entrant, local assembly has a bright future in Pakistan but the imports of vehicles had to date not proven to be a big burden on the national fund in comparison to the swelling import bill of CKD/SKD kits.

He added industry experts are of the opinion that the highest-ever localisation of parts is in automobiles from 55pc to 65pc, but the ground reality is that no investment has been made towards localisation of hi-tech parts, transmissions, imported engines, and electronic control units in the last 30 years.

Pakistan has witnessed obsolete engines and technologies during the last three decades, in addition to non-compliant emission standards. Suzuki Mehran operated for 30 years without any changes in the model followed by a 12-year journey of particular shape and design in other models. These expensive and outdated models failed to compete in export markets as observed by the new entrant.

Local industry and vendors have been dependent upon imported raw materials, raisin, sheet metal, plastic materials, and chemicals, etc.

He added that the claim of reaching higher localisation did not imply a proportionate decrease in import bill.

The story was filed by the News Desk.
The Desk can be reached at info@thecorrespondent.com.pk.

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