LAHORE - Any move to force the auto sector manufacturers to reduce prices of their products against the principle of market economy would badly affect the performance and profitability of multi-billion auto industry, manufacturers said.
The auto industry representatives while commenting on the upcoming meeting of Public Accounts Committee to review the car prices, said that public listed companies cannot be grilled by the PAC whereas they should have invited Ministry of Commerce and Engineering Development Board but that too is questionable as the govt has failed so far to provide peaceful three times meal to poor let alone providing them cars at affordable prices. They said that the prices are governed by market forces in the free market economies and the role of the government is limited to policy framework including tariff and non-tariff policy measures.
They added that the countries like India with wiser policies and economists strived to protect local industry for years and are now in a position where local cars are cheaper than international brands; however this was possible only after decades of protection. While comparing Pakistani cars the experts said that there is no comparison in size still our assembled Toyota Altis and Honda City are cheaper than India.
On the contrary, Pakistan's policy makers’ seriousness could be gauged from the fact that Auto Industry Development Plan which was approved in 2007 under which import of used cars was allowed up to age of three years was changed only 2 years down the lane yet they claim that auto industry is over protected for last 40 years.
He said that the legislators failed to provide legal cover to the investors and let them exposed to unfair competition with smuggling, under invoicing, MIS declaration and violation of copyrights. They said that the local auto industry is already facing a number of issues. The cost has increased due to depreciation of local currency against US dollar and Japanese Yen, low volumes; higher fixed cost, relaxation in age limit for import of used cars. High sales tax; upward increase in minimum wages; increase in utility charges and energy issues were the major causes that forced the manufacturers to increased prices of their products.
“Despite all these challenges local auto industry is not only meeting the local demand but also exporting some of its products to earn more foreign exchange for the country’, they said. In the previous meeting of the sub-committee some baseless points were raised against auto sector manufacturers due to lack of information, they said.
They said the ground realities are very different as the Pak Rupee has depreciated against US$ from Rs 59.86 in 2005-06 to Rs 94.83 in July 2012. In the same way the local currency has depreciated against Japanese Yen from Rs 0.52 in 2005-06 to Rs 1.14 in July 2012. Similarly, utility charges, minimum wage, reducing production efficiency due to import of used cars, power shortage issues, high interest rates and high inflation are some other issues which are major causes of continuous increasing cost of doing business in the country, they said.
They said the government should not impose any decision regarding pricing of auto sector forcefully.