Fixing The Auto Sector

Pakistani auto sector’s historic slowdown has made its way to the Senate’s agenda; both government and opposition Senators lambasted the industry’s practices in the ongoing session of the upper house. Criticism is certainly justified. Prices have skyrocketed without a comparable increase in quality workmanship and safety features, the market has been cornered by local car assemblers and now they unilaterally increase prices, local manufacturing has been ignored to maintain profits, and a cartel of dealers control all new vehicle deliveries and extort customers for hefty funds to ensure immediate delivery of already purchased cars. It is about time such issues are taken up at the highest level of government.

Beyond simply debating the subject it is encouraging to see that action is being taken. Minister for Parliamentary Affairs Azam Swati informed the house that new rules were being put in place to punish the manufacturers of unsafe vehicles and said that a draft to this effect was before the federal cabinet.

Without a doubt, shoddy manufacturing and malfunctioning safety equipment needs to be punished, but the government must realize that simply penalizing these will not fix the auto industry’s woes. The government needs to understand its own role in increasing prices. It was the Pakistan Tehreek-e-Insaaf’s (PTI) quest for increased revenues which led it to heavily tax the auto industry, taxes which the industry simply shrugged off and passed to the end consumer in the form of increased prices.

The Federal Cabinet needs to comprehensively re-think its auto sector policy to make any effective change. The delivery mafia needs to be conclusively and decisively broken; taxes need to restructured to make them less onerous; financial incentives need to be taken away from assemblers and given to true local manufactures; used car imports need to be encouraged to provide competition to the local industry.

Anything short of a complete overhaul will not solve this complex crisis.

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