There is an ongoing increase in the number and use of imported passenger vehicles in Pakistan. The total number of used cars imported to the country in FY14 was recorded to be around 22,000, which grew in the subsequent year FY15 by ten thousand more items.
According to the data provided by Customs Appraisement South, the import of motor vehicles regarding value increased by 19.4 percent in FY14-15. Vehicles worth Rs. 53.93 billion were imported into the country in the first ten months, drawing in customs duty of Rs.21.126 billion.
At the time imported vehicles make up around 15 percent of total car sales in Pakistan. Reports suggest that current fiscal year has witnessed a record high in the import of cars so far with a significant surge of 35 percent –worth over $218 million- compared to the same period in the previous year.
Over the past few years, improved macroeconomic conditions of Pakistan have had a positive impact on the growth of automotive industry. Higher per capita income and reduced interest rates have resulted in a boom in auto sales; obviously lower fuel prices also have a positive impact on auto prices.
Traditional luxury vehicles in Pakistan:
While there is widespread of Japanese compact 660cc cars in Pakistan, imported luxury cars have also gained unprecedented popularity recently, this segment contributes over 60 percent of consumer vehicle imports but cannot be categorized as luxury vehicles.
According to Carmudi.pk, a leading online vehicle marketplace, Japanese SUVs, primarily the Toyota Land Cruiser series- are at the top of this list amongst a few others. According to market experts, including luxury car dealers, these SUVs beat the German luxury saloons regarding popularity in Pakistan, Carmudi has also seen a sharp increase in the year 14-15 for luxury hybrid vehicles, although this year there is a smaller increase due to the reduction in local fuel prices.
Carmudi went on to say that their share of sedans is growing, primarily because of better pricing by the Audi A3 and A4 series which come with smaller engines and are very popular mid-priced luxury vehicles. Having spoken to some dealers, they also confirmed that some big corporations are shifting to these vehicles as their choice of executive cars.
Impact of the 2015-16 budget variables on vehicle imports:
Market stakeholders are waiting for the government to announce new auto policy, which has not been revised in the past three years. Federal Minister for Industries, and Production, GhulamMirza Khan Jatoi, issued a statement last year, saying, the new auto policy will be designed such that as to attract new investors, and that the government is already in talks with some foreign carmakers..
As per the existing auto policy, there is an age limit of maximum three years on imported cars. Importers definitely want the government to increase this age limit to make imported cars more affordable for the general public.
Impact of growing number of imports on local manufacturers:
Competition is developing for local manufacturers as more imported vehicles come into the market. According to Raja Murad Khan, MD Carmudi Pakistan, “there will be a scramble by local assemblers to improve their quality and features. These are very natural market dynamics, and we already see Suzuki coming up with new variants and finally upgrading some of the old ones. It will trickle on to the other assemblers in Pakistan.”
Suzuki is already in the process of ceasing production of some of its older models -Liana, Mehran, and Cultus to name a few. Cultus is rumored to be replaced by Celerio 1000cc by the end of this year.
According to market analysts, this increasing competition will have a positive impact regarding quality as well as the cost of domestically produced vehicles.