The impact of tax increment shuts down car productions in Pakistan

The impact of tax increment shuts down car productions in Pakistan

In line with the recent tax increment on cars, demand has dropped significantly and the companies are left with no option other than to hold the production.

According to the reports, Honda Atlas Cars Pakistan, (maker of Honda models in Pakistan) has stopped its production line from 12 July till 21 July due to the decreased demand. Following the impact, other two members of the Big Three of Pakistan, Indus Motors (makers of Toyota models) and Pak Suzuki (makers of Suzuki models) are also facing similar problems.

Just a year ago, Honda was working in double shifts to cope up with the demand, and now the company is producing just 160 units per day, as compared to 220 units per day earlier this year. A senior executive of the company stated that, “Our inventories from the last month and the first 10 days of July have grown rapidly because of steep increase in car prices after currency devaluation as well as imposition of Advance Customs Duty (ACD) on all our imports and Federal Excise Duty (FED) on assembled cars, leaving us with no option but to shut down the plant to cut production. If the present trend holds, we expect our sales to drop to less than 30,000 units this business year (April 2019-March 2020) from over 48,000 units last year,”

The impact of tax increment shuts down car productions in Pakistan

To respond to the situation, Indus motors is having a two day weekend while Pak Suzuki is yet to finalize their approach after analyzing production to sales ratio. According to Pakistan Automotive Manufacturers (PAMA), sales of top of the line cars ‘Civic and City’ have been decreased by over 6.9%.

Other than the impact of the latest tax policies, the local car manufacturers are offering miserable products against many handsome prices. The Big Three have been selling ‘so-called’ latest models, which are not much different from the models produced decades ago. On the other side, Japanese imports provide many latest features compared to the local ones in many competitive prices.

A standard brand new local manufactured car worth approximately 1.5 million provides no safety feature and unattractive outlook, whereas a used imported car provided many luxuries including safety features, fuel economy, better handling, stylish looks for considerably less price.

Saqib Khan
I am an accountant with over 3 years of experience in the field of Accounts and Finance. I contribute to e-Syndicate as Researcher and News Writer. I write about Finance, Business, Local Pakistani News and International Finance.