The auto industry dreads a dramatic sales decline

Karachi: Auto industry players predict a 30% drop in sales in 2022-23 due to uncertainty caused by an increase in withholding tax on filers and non-filers, the imposition of a 1% capital value tax on vehicles larger than 1,300cc, strict auto financing rules to reduce demand, high-interest rates, and more price shocks.

According to market insiders, assemblers are also exercising their muscles to pass on the impact of the rupee’s continued depreciation against the dollar and high freight charges in the form of automobile price increases after Eidul Azha, with many emphasizing that the industry is in crisis.

Indus Motor Company (IMC) has already discontinued advance vehicle bookings as of May 18, followed by Lucky Motor Corporation Limited (LMCL) on Picanto Automatic and Sportage as of May 20, and Pak Suzuki Motor Company Limited (PSMCL) as of July 1.

The assemblers made these decisions in response to the coming exchange crisis and the SBP’s plan to prohibit the creation of letters of credit (LCs) for importing parts and accessories beginning May 20, 2022.

New taxes, restrictions on auto finance, and skyrocketing fuel prices cause buyers to be concerned.

In an interview with Dawn, IMC CEO Ali Asghar Jamali predicted a 30% drop in vehicle sales in FY23 owing to rising gasoline prices, SBP limits on opening LCs for auto parts, and new taxes implemented in July 1.

Mr. Jamali remarked on the possibility of a price increase after Eid, “We have to jack up rates.” There is no other option.”

According to auto industry insiders, the impact of increased taxes, soaring interest rates, vehicle prices, high petrol, and diesel prices, LC restrictions, and reduction in consumer financing tenure will be visible in September 2022 vehicle sales data, as assemblers are currently upbeat over thousands of booking orders for cars, jeeps, SUVs, and pickups made a few months ago and expected to be delivered in the coming months.

Auto financing accounts for around 26 percent of IMC’s overall sales. In comparison, consumer financing accounts for 35 percent of Pak Suzuki’s total sales.

Fearing a 25-30% drop in sales in FY23, the Korean auto assembler stated it had not raised Kia vehicle prices. However, following the passage of the Finance Act, some modifications have appeared regarding the application of 1pc CVT on vehicles larger than 1,300cc beginning July 1. As a result, two Kia Stonic vehicles are now available with a 1pc CVT for Rs44,250-47,250, three Sportage models are now available for Rs53,000-64,990, and three Sorento models are now available for Rs68,360-74,990.

According to Honda Atlas Cars Limited (HACL), the City 1.5’s 1pc CVT costs between Rs35,890-38,990, while the Honda BR-CVT V’s costs between Rs42,490-42,740 in both modes. On the other hand, the 1pc CVT on six Honda Civic models ranges in price from Rs55,490-66,740.

In terms of withholding tax on filers and non-filers, a HACL representative stated that there had been no change in WHT on filers in the Honda product line. Non-filers, on the other hand, are taxed Rs75,000 when acquiring the Honda City 1,200cc, formerly Rs50,000. Non-filers pay Rs150,000 instead of Rs100,000 for the 1,301,600cc variant.

PSMCL has instructed its authorized dealers to charge filers Rs10,000 instead of Rs7,500 for Alto (all variants), Bolan, and Ravi. At the same time, non-filers will pay Rs30,000 instead of Rs15,000 for the same models.

Income taxpayers who want to buy a WagonR or Cultus (all models) would have to pay Rs20,000 instead of Rs15,000, while Swift buyers will have to pay Rs25,000.

Non-filers of Wagon R and Cultus will have to deposit Rs60,000 instead of Rs30,000, and non-filers of Cultus will have to pay Rs75,000 instead of Rs50,000.

According to an Excise and Taxation Sindh official who requested anonymity, motor vehicle registration fees have remained the same for the past two years. Still, the rate of WHT on filer and non-filer and CVT has been raised from July 1.

The automobile registration charge for cars/jeeps under 1,000cc is one percent of the vehicle’s worth, followed by 1.25 percent for 1,000-1,300cc vehicles, 2.25 percent for 1,301-2,500cc vehicles, and 5 percent for cars/jeeps over 2,500cc.

“Targets to obtain auto financing are difficult due to limited queries from clients,” stated a private bank employee involved in auto leasing.

Car sales by Pakistan Automotive Manufacturers Association members increased to 210,633 units in 11MFY22, up from 139,613 units in the previous fiscal year. LCV, van, and jeep sales increased to 40,255 from 45,891 units.

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Originally published by: Dawn