Karachi: The local auto industry faces uncertainty before the 26th fiscal year budget, as the International Monetary Fund (IMF) presses the government to rationalize the tariff of cars and allow the trade import of used cars.
The International Monetary Fund has argued that the auto sector is excessively protected, with customs tariffs and duties on locally produced vehicles up to more than 40 %, making the sector less competitive and effective.
The compounds of cars and sellers of parts have expressed their concerns that allowing commercial imports of used cars and reducing customs tariffs on fully created units (CBUS) less than a specific threshold can lead to the collapse of the local industry. These concerns were discussed in a meeting with a special assistant for Prime Minister Harun Aarkh Khan on May 6, as the representatives of industry expressed their concerns about the negative impact on their business.
However, SAPM reassured them that the government will balance the definition reforms to protect the local industry while compatible with the recommendations of the International Monetary Fund.
The government suggested reducing customs tariffs by 5-10 % as part of a gradual decrease in additional customs duties (ACD) and organizational duty (RD), with higher cuts of CBU tariffs with larger engine sizes. The goal is to reduce the burden on consumers by lowering the prices of vehicles and locally produced vehicles and parts, while supporting the growth of the local market.
The International Monetary Fund is directed to increase the competitiveness and reduce inefficiency in this sector, which may benefit from consumers by lowering prices. However, the local industry, which is currently enjoying high levels of customs tariff protection, is still resistant to these changes, on the pretext that it may harm the sustainability of the sector in the long run.
