Restrictions on CKD kits damaging auto industry: IMC chief

Restrictions on the import of completely knocked down (CKD) kits are damaging the already under stress automobile industry, said Ali Asghar Jamali, chief executive officer of Indus Motor Company.

“We know the country is passing through a difficult phase due to high trade deficit. We support measures to overcome the trade deficit but these should be sustainable. Of the $78 billion total imports in the last fiscal year, the share of the automobile sector is merely $3.2 billion. But these imports generate huge economic activities and earn revenue of up to $1.6 billion for the public exchequer,” he added.

“The restrictions on the import of CKD have led to a decrease in the production of the Indus Motor Company to 40 per cent of its existing capacity. All automobile manufacturers have decreased production. The prevailing scenario has affected the businesses of vendors employing more than three million people. As such, the cost of putting restrictions on the imports of CKD is much higher,” he said, while talking to a select group of journalists from print media during his Lahore visit.

“Despite challenges, the company has not laid off any employees. But it is not the case with the vendors,” Jamali said.

He stressed the need to adopt a strategy to overcome the current account deficit but not at the cost of the local industry, enabling millions of families to earn respectable livelihood.

“Inflation, high interest rate and impacts of floods will result in a decline in the automobiles sale by 50 per cent. It will not only hurt the industry but will also deprive the national exchequer of the much-needed revenue, as on an average, 39 per cent of a car’s price goes in taxes,” he said.

There is a need to categorise the imports and not touch the items that cost less, return handsome amounts in the shape of taxes and generate enormous job opportunities, he noted.

“The import bill of food and petroleum products is staggering around $27 billion, the biggest contributor to the current account deficit. There is a need to go for import substitution through local manufacturing and exploring our own resources.”

“While restricting imports of luxury goods, the imports for local manufacturing should be allowed,” he argued.

Jamali believes that the auto industry is the mother of all industries with a multiplier effect of 10.

“A single job created in an original equipment manufacturer (OEM) results in 10 jobs in the allied sector. The local parts manufacturers and localisation are the biggest victims of import restrictions, as IMC alone procures local parts worth over Rs270 million every day. Numerous vendors are resorting to layoffs due to the current pressures,” he said.

According to Jamali, almost all automakers had to go for plant shutdowns for extended periods due to restrictions on the import and opening of the letters of credit (LCs).

The persistence of the prevailing scenario will only hinder foreign direct investment in the country, he said, adding: “The IMC has announced to invest $100 million for local production of hybrid cars. The locally-manufactured Corolla Cross will be available for valued customers next year. It will also open doors for technology transfer, GDP increase, employment generation and exports,” he said.