The government must pursue its policy of safeguarding interest of local car assemblers as agreed in Auto Industry Development Program (AIDP), which discourages imports, Pakistan Automotive Manufacturers Association (PAMA) said on Friday.

It must also ensure that new entrants in the market are not given unfair advantage over existing original equipment manufacturers (OEMs), which include Toyota, Pak Suzuki and Honda, said Abdul Waheed, Director General PAMA talking to media.

“OEMs are importing components that are not manufactured in the country at 32.5 percent duty. However, if they import any component that is produced locally, they have to pay a duty of 50 percent,” he said.

Waheed, who was flanked by senior management of Indus Motor, the Pakistani assemblers of Toyota and Daihatsu brands, was critical of calls for easing import of used cars.

“We appreciate government’s decision of decreasing age limit on imported cars,” he said. “The local assemblers and allied industry has invested heavily in last five years. A lot of jobs are at stake.”

On December 8, 2010, government allowed import of used cars up to five years old. The long awaited decision, caused unease among assemblers while traders rushed to book orders.

However, the decision was taken back on December 30. Used car dealers have been agitating since then as they claim that over 6000 cars are already on way to Karachi port.

Parvez Ghias, CEO of Indus Motor, said that used car importers have advantage of lower duties as their effective payments come to just 25 percent after accounting for depreciation in cost at one percent per month.

“I don’t understand the logic for imports at a time when government wants to invite new car manufacturers,” he said. “Even the policy for import of used cars is being misused. It is for expatriates and not for dealers.”

Asked to explain why there is so much demand for used cars, he said: “Okay, let everyone import then. We will stop production and start commercial trade as well.”

Officials of Indus Motor said that sales of cars and light commercial vehicles jumped to high of 250,000 units in 2006/07 from just 52,000 in 2000. “This led all OEMs and their vendors to invest Rs50 billion in capacity expansion,” said Raza Ansari, Director Marketing.

The sales fell to 100,000 cars in following years as security situation deteriorated, bank financing stopped and import of used cars was liberalized, he said.

Ghias also said that any entrant in the market should not be given unfair incentives. “We would support if a new company is allowed exemptions on import of machinery etc. But, its development should not come at our cost.”

His remarks follow reports that government was mulling to allow new car assembler to import all the components at 32.5 percent of duty for three year even without localizing production.

He said that Toyota has reduced prices on its vehicles as it adds new pressing plant, which allows manufacturing more components locally. “We have actually passed on the expected decrease in our costs.”