PAKISTAN is passing through critical economic transition and visionary policies can help save the country towards green pastures. The national economic interests must be retained and kept supreme in the larger interest of the masses. The current government policies favouring used car imports in Pakistan constitute severe risks to the local automotive industry, threaten millions of jobs, block economic growth and disrupt the industry’s potential to thrive. To safeguard the local industry and promote sustainable economic development, there is an urgent need to reform policy to discourage or restrict used car imports by strengthening a supportive environment for domestic automobile manufacturing. This is right time to consult the stakeholders and come up with viable solutions.
One of the core threats to the domestic industry is the influx of imported vehicles, which directly compete with locally manufactured cars, leading to a decline in demand for domestic automobiles and causing trade imbalances. In FY 2022, the local parts purchase value was Rs 250 billion, with the industry now spending over Rs 270 million daily on local parts. Previous policies resulted in economic losses as the government received fixed dollar amounts in taxes regardless of car prices. Consequently, manufacturers are shutting down plants and laying off workers, increasing unemployment. The import of used cars has significant economic implications, causing local vendors an estimated loss of Rs 36 billion and pushing them towards closure. Immediate intervention is needed to reverse these negative trends. The rise in imported cars threatens innovation in Pakistan’s local automotive industry. For sustainable economic growth, Pakistan must introduce policies that support the domestic industry. Reduced demand for locally manufactured vehicles lessens companies’ incentives to invest in R&D for better quality and safety. A 2024 report shows an increase in imports of commercial vehicles, SUVs, vans and luxury cars to nearly 6,600 units. Consequently, Pakistan’s automotive sector risks falling behind international competitors in innovation and technology, affecting its global competitiveness. Therefore, the local industry needs protection and incentives.
The accessibility of locally manufactured vehicles is compromised by the surge in used car imports and the associated policy environment. In February 2024 alone, 3,213 used vehicles were imported, compared to 396 units during the same period last year. High taxes, duties and import tariffs imposed on domestically produced automobiles inflate their retail prices, placing them out of reach for the majority of consumers, particularly those from lower-income segments. This affordability gap sustain a cycle of inequality, where access to reliable transportation, a fundamental necessity for economic participation and social mobility remains elusive for a large number of population. The small consumers and low-income groups should also have a voice and right to enjoy suitable and economical transportation.
According to a report, millions of poor-quality used cars, vans and minibuses are exported from rich countries to developing nations, significantly contributing to air pollution and climate change. This growing climate challenge demands attention. Regulation is crucial for achieving climate, air quality and road safety targets. Imported used vehicles often fail to meet environmental and safety standards, are no longer roadworthy and cause accidents. Missing key technologies, often illegally removed, is another reason to limit used car imports. Development strategy and environmental safety must be key concerns in the coming years.
Reintroducing regulatory duties on used car imports can mitigate adverse effects on the local automotive industry by leveling the playing field and encouraging domestic production and consumption. Reducing import duties on auto parts, opening trade with India for cheaper components and stopping the misuse of used car imports can also help. Pakistan should diversify its local manufacturing sector and develop viable solutions. Engaging industry stakeholders in policymaking is crucial to align decisions with national interests, promote industry growth and safeguard jobs. A stable policy framework is essential to provide certainty for local businesses, fostering long-term growth, Pakistan can come up with some solid solutions and get financing from climate finance fund too. Sustainable growth with supportive policies can serve the local automotive industry and can blossom along with its contribution to the economy and create additional employment opportunities. Moreover, by stimulating innovation and competitiveness, the industry can position itself as a key player in the global automotive market, thriving economic growth and prosperity.
In conclusion, the surge in used car imports and parts poses significant challenges to Pakistan’s automotive industry. It’s time for action. These practices weaken domestic manufacturers, jeopardize economic stability, job security and environmental sustainability. Addressing these challenges requires government intervention, industry collaboration and investment in local manufacturing and innovation. Reintroducing regulatory duties, establishing a stable policy framework and balancing treatment between domestic and imported vehicles are crucial steps to protect local manufacturers, promote growth and ensure a sustainable future for the sector. Prioritizing our national economic agenda and fostering a supportive policy environment will unlock the sector’s potential, driving innovation, job creation and overall economic development. Timely decisions will safeguard the national economy and foster a conducive environment.
—The writer is Islamabad-based research analyst.
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