KARACHI, June 02(ABC): The automobile sector of Pakistan endured a rollercoaster ride during the outgoing fiscal year 2021-22 owing to a host of factors such as multiple price hikes and a singular drop in prices on account of the government’s decision to slash duties and taxes.
The country saw car prices going down across the board for the first time after the government reduced duties and taxes on cars, otherwise the prices have never gone down except for a couple of times when companies reduced a single model’s price because of low demand. It happened only in the Suzuki Wagon-R and United Bravo’s case. Other than that, prices have technically remained irreversible in Pakistan.
During the fiscal, federal excise duty on all vehicles was reduced by 2.5%; sales tax on under 1000c was slashed to 12% from 17%, while 7% additional custom duty was removed on cars below 1000cc and reduced on cars above 1000cc to only 2%.
The government rationale was to make cars more affordable for middle and lowerA-income groups. The move was also expected to provide impetus for the auto sector to increase volumes and subsequently scale up localisation. This tactic spurred car sales, as people fearing reversal thronged to buy cheaper cars.
Auto sales remained robust in the first 10 months of the fiscal year 2022 — showing a 50% increase with 226,481 units sold. However, April sales declined due to several reasons discussed in this article. Auto sales in April were recorded at 21,950 units, showing a month on month decline of 19%.
By September 2021, the State Bank of Pakistan (SBP), sensing the overheated economy with current account deficit jumping up 81% month-on-month in August, had to revise regulations for consumer financing including auto financing. The restrictions on auto financing included a financing limit and period for auto financing.