The federal government has prepared Auto Industry Development and Export Policy (AIDEP) 2021-26 with objectives of ensuring better quality, safety features in cars and affordability of small cars to Pakistani customers. The Automotive Development Policy (ADP) 2016-21 has expired, giving way to the new developments and incentives under the Automotive Industry Development and Export Policy (AIDEP) 2021-26. Earlier this year, the government announced a series of tax exemptions for carmakers in Pakistan in the interest of strengthening and ensuring the growth of the industry. The AIDEP 2021-26 focuses on enabling the local car industry to shift to complete local manufacturing for added viability and sustainability.
The Ministry of Industries and Production (MoIP) presented the policy before the federal cabinet earlier today, which approved the propositions made in the AIDEP 2021-26 which will ensure further development of the Pakistani car industry. As per an official document available with ProPakistani, here are the salient features of the policy: As per the analysis from the Ministry of Industries and Production, the new products are not likely to observe an increase in imports in the next year due to time lag in investment. This implies that there will not be any short-term ramifications of the policy on the current account balance. The AIDEP 2021-26 lays a particular emphasis on the localization of auto-parts and plans to expand on it in the near future.
Now the government has recommended tax exemption for locally assembled cars of up to 800cc engine capacity. Under the new auto policy, the Ministry of Industry has recommended ending additional customs duty on small cars, excise duty on locally assembled cars and withholding tax on cars with engine capacity up to 800cc. The draft, released by the Engineering Development Board of the Ministry of Industries and Production, also recommended decreasing import duty on electric vehicles in order to encourage people to use environment-friendly EVs.
As per the Auto Policy 2021-2026, the import duty on electric vehicles will be reduced from 25% to 10% for one year. The board has also decided to reduce the regulatory duty on CBU import of hybrids (15% for above 1,800cc, 0% for 1,800cc and below). Lower the entry threshold for New Investment (Two categories namely Greenfield Investment i-e the installation of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles of a make not already being assembled / manufactured in Pakistan and Brownfield Investment i-e. revival of an existing assembly and / or manufacturing facilities, that is non-operational or closed on or before July 1, 2013 and the make is not in production in Pakistan since that date and that the revival is undertaken either independently by original owners or new investors or under joint venture agreement with foreign principal or by foreign principal independently through purchase of plant).
A new manufacturer under Automotive Development Policy (2016-2021), establishing maiden assembly facility will invariably need separate treatment and greater incentives in the early years to enable it to introduce its brand, develop a market niche and share, create a distribution and after-sales service networks, and develop a part-manufacturer base. Greenfield Investment is defined as the installation of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles of a make not already being assembled / manufactured in Pakistan.
