Pakistani car assemblers likely to increase prices of variants following duty hike on aluminium alloy

Car assemblers in Pakistan are likely to further increase prices of their different variants aimed at passing on the financial impact of recent increase of 15 percent in Regulatory Duty (RD) on iron and steel products and 10 percent on aluminium alloy, according to well informed industry sources. Indus Motors which assembles Toyota cars recently increased the price of cars and would raise them further by passing on the impact of RD to the consumers.

The two other players: Suzuki and Honda are also expected to increase prices. All the parts and sheets are either made up of imported steel or aluminium which are primary raw materials and any impact on their prices will be passed on to the consumers. The impact of increase in imported steel and aluminium on vender industry will also ultimately be passed on to the consumers. The number of tariff headings (items) has been increased on the import of ferrous metal products for imposition of Regulatory Duty (RD). Due to imposition of RD vending industry is very disturbed because their cost of each by-product will increase.

An industry source said imposition of RD on aluminium alloy would lead to increase in prices of motorcycles. "The price of used imported cars is on the decline as compared to local cars. The government is increasing prices of local cars by punitive duty and at the same time demanding that prices should be reduced," he added.

"When vender industry will increase price of their products and sell to the assemblers, they will subsequently passed it on to the consumers. Assemblers cannot absorb abnormal impact in parts' prices. We are being pushed to the wall," he added.

Official documents available with Business Recorder reveal that the Revenue Division apprised the ECC on March 18, that presently, a regulatory duty at 10 percent was in place on Aluminium Scrap [PCT 7602.0090] whereas there was no regulatory duty on Aluminium Alloy [PCT 7601.2000] - an intermediary product made from scrap; and that this anomaly had placed the local manufacturers of aluminium alloy at a disadvantageous position.

Revenue Division maintained that in order to protect the local industry and to secure government revenue, it proposed to: (i) enhance regulatory duty on import of finished products of iron and steel; and (ii) impose a Regulatory Duty at 10 percent on import of aluminium alloy; and the total revenue impact of these measures would be around Rs 1.7 billion in the remaining period of the current financial year.

Revenue Division further stated that the ECC, while considering the above issue in its meeting held on March 7, had directed the Secretary, Commerce Division, Chairman, Federal Board of Revenue and Chairman, National Tariff Commission (NTC) to further examine the issue and submit report to the ECC for consideration.