According to official numbers, imports of used cars have reached Rs.75 billion during the outgoing fiscal year. This year, 53,600 units were sold versus 32,100 units last year, reaching its all-time high. Nonetheless, the implications of rising imports are not encouraging, putting extensive pressure on country’s trade balance.
Pakistan’s auto sales of locally produced cars have seen a huge jump of 17% during fiscal year 2015-16 on a yearly basis. However, this number looks trivial when compared with the imports of used cars witnessing a mammoth rise of 67% during the same period.
Effects of rising auto imports
Sale of locally produced vehicles has been adversely affected during the last few years due to burgeoning demand of imported cars. Mashood Ali Khan, Senior Vice Chairman Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) while talking to media highlighted that it is crucial for Pakistan to start investing in its auto industry. He further added, Pakistan being a country of 200 million people under the age of 30 and investment in this sector would create job opportunities for our youth.
Khan said, the amount spend on imports if re-directed towards local investment would be enough to establish two Honda Atlas-sized plants in the country. He believes imports are denting local economy by not creating job opportunities for Pakistani talent. He stated:
“Import of used cars can never serve this objective”
The proponents of imported cars believe that local producers do not provide enough value for money and this void is filled by imported cars. Chairman Adil Khan at Automotive Traders and Importers Association Karachi defended the import, saying importers also employ a large number of workers at their showrooms.
Long term solution
Although there is some merit in importers’ stance since local producers offer very limited options at high prices. However, one cannot undermine the adverse impact of bulging imports on economic development. The auto policy should boost foreign investors’ confidence to pump their money in Pakistani auto sector yet they are reluctant to compete with more than 50,000 used cars every year, stated by Adil Khan.
On a long term basis, Pakistani auto industry requires heavy investments in new plants. Local producers need to provide more options to rising consumer demands and offer high value for money. Competition from imported cars will continue to put pressure on auto manufacturers unless stringent measures are taken by the government to safeguard and sustain local industry.
Please comment and suggest which side of the story has more merit.
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