Budget 2021-22: Car prices expected to come down by Rs104,458 to Rs229,458

Federal Minister for Industries and Production Khusro Bakhtiar speaking at a press conference said cars production would be augmented to 300,000 during the current fiscal year and to 500,000 by 2025.

Flanked by Federal Minister for Information and Broadcasting Fawad Chaudhry, terming the automobile sector as a potential job creation sector, the minister thought that each car produced in the country creates employment opportunities for at least five people.

He said incentives have been provided in the 'Meri Gari Scheme' to make small cars financially reasonable for the middle class.

The minister reminded the people that the government had removed Federal Excise Duty (FED) and Additional Customs Duty (ACD) on locally manufactured cars of up to 1000cc in the 2021-22 budget.

"This government’s intervention will significantly reduce the prices of all cars. The manufacturers have promised to pass on the impact of the reduced tax regime to customers immediately," he added.

The minister said prices of cars were estimated to be reduced by Rs104,458–Rs 142,388 nearly for cars below 850cc, Rs112,118-Rs186,375 for cars from 1001-1500cc, Rs169,958 for the 1800 cc category, and Rs229,458 for cars of 2000cc.

He said the government has also reduced sales tax on locally manufactured cars while reducing duties and taxes on the import of small cars (CBUs) to bridge the demand-supply gap that would also result in price reduction.

Industries and Production minister said the automotive sector was one of the major industrial sectors of the country with the potential to drive the entire economy of the country with a share in Large Scale Manufacturing (LSM) of around 7.81 per cent.

He said the government intends to promote localisation of auto parts in the country, the purpose is to create employment, promote downstream industry and save foreign exchange.

"A condition of 30% value addition has been introduced on imported raw materials and components to be used for manufacturing of vehicles in the country and to ensure rapid localisation, the government shall update the localised manufacturing of auto parts every six months," he said.

The minister said the government has introduced measures to deal with the issue of “Own Money”, adding that the government would charge from Rs50,000 to Rs200,000 tax where the first registration is not in the name of the person who booked the vehicle, while it would also impose the compulsory payment of KIBOR+3% mark up by manufacturers on delivery beyond 60 days.

In addition, the maximum upfront payment on booking would not exceed 20% of the invoice value at the time of booking.

Khusro said the export targets for the manufacturers would be up to 10 per cent of the import value by the end of five years of this proposed policy.

A higher number of electronic vehicles in the local market would encourage auto companies to invest in related infrastructure in Pakistan to facilitate such vehicles, he added.