How will consumers benefit from the New Auto Policy 2021-26?

Finally, The Wait Is Over!

The revision of car prices in Pakistan has been a topic under discussion in the country with people debating over it over the dining table and even social media. A lot of speculations and rumours were heard about the revision of car prices and despite several notifications, still, the picture was pretty much unclear for car users in the country.

However, the wait is over! The Pakistan Tehreek-e-Insaf (PTI) government has announced Pakistan’s new Auto Policy for the years 2021-2026, which is definitely a piece of great news for car enthusiasts in the country. Moreover, this new policy revealed by the government brings a great relief for the lower-middle and middle-class car buyers, which has been seen after quite a long time. Let’s get into the details right away!

MAIN OBJECTIVES OF ADP-2016-21

First of all, let’s take a look at the main objectives of the Automotive Development Policy (ADP) 2021-26. The first and foremost objective of the new polity is to facilitate higher volume, more investment and better quality with the latest technology. Secondly, it is very important to create a balance between tariffs and industrial growth to ensure the permanence of all the stakeholders. Moreover, the new auto policy of Pakistan ensures consumer welfare and provides policy predictability and consistency for investors and allows provides them with a mid-term review to cater for upcoming developments.

Highlights Of New Policy

Reduced Vehicle Prices

The most awaited decision is now finally here. As per the new policy, the prices of vehicles up to 850cc will reduce to up to PKR 105,000. If we talk about the 1000cc cars, the prices will decrease up to PKR 146,000. Moreover, if we look specifically at Toyota Yaris and Honda City, the prices will decrease up to PKR 125,000.

The Government of Pakistan announced a reduction in Federal Excise Duty & Additional Custom Duty. As a result to which Indus Motor Company Limited (IMC) decided to pass the duty benefit for customers. The new prices for Toyota Yaris variants will be as follows:

IMC is the first auto assembler listed company to have officially reduced its Yaris, Corolla X, Hilux Revo, and Fortuner lineup prices with the maximum differences of PKR110,000, PKR120,000, PKR120,000 and PKR400,000, respectively.

New Jobs In Auto Sector

After an effective price cut in vehicles, another important highlight of the new Auto Policy 2021-26 is the employment opportunity in the automobile industry. According to the new policy, the automobile sector will produce approximately 3,75,000 jobs in the country which is indeed a great step by the government. It is pertinent to mention here that currently, in Pakistan, there is a very limited number of jobs available in the auto sector. It might be true whether new automakers have opened doors in the country, however, it is yet to be revealed what kind of jobs will fall into the market.

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Import Duty On Electric Vehicles

The government has been encouraging the use of electric vehicles (EVs) as part of an ambitious shift towards clean energy and an emission-free future. Another great highlight of the new Auto Policy 2021-26 is the massive decrease in the import of EVs in the country. As per the new policy, the import duty on EVs will be reduced from 25% to 10% for one year and 1% customs duty will be levied on the import of electric vehicle parts.

Why are cars expensive in Pakistan?

The main reason for the high prices of vehicles in Pakistan is said to be the import of raw materials and spare parts used in major industries. According to the Chairman of the Pakistan Automotive Manufacturers Association (PAMA), taxes and duties on imports of vehicles and their raw materials are very high in Pakistan, which also raises the vehicle prices.

He said that none of the raw materials used in the manufacture of vehicles is available in Pakistan and are forcibly imported. The steel sheet used to make the body of the car is not manufactured in Pakistan according to international standards and we have to import it from abroad.

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The new automobile policy promotes the manufacture of auto parts and raw materials in Pakistan, so a significant reduction in motor car prices can be expected in the next few years. The government would keep a close eye on the raw material imports so that the localization could enhance. Total industry capacity stands at 415,000 cars per annum. To recall last year, Pakistan manufactured 164,000 vehicles. Lastly, export targets for the local manufacturers will be up to 10% of the import value by the end of five years of this policy.

Regulation of ‘OWN’ practice

Going forward, to discourage the ‘OWN’ culture practised by car investors, the government under the new policy has recommended car buyers to register cars under their names. The National Assembly Standing Committee on industries and production decided to impose a fine of 3% plus KIBOR on auto companies that delay deliveries above 60 days. The rate will be charged on the amount the buyer has paid. It is to resolve the ‘own money problem.

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