The Competition Commission of Pakistan (CCP) has issued a Competition Impact Assessment report for the automobile sector, suggesting the government to open commercial import of used cars to create an atmosphere of competitiveness in the auto industry.The report says that allowing the import of used cars on the basis of auto tariff regime will have a positive impact on the domestic automobile industry and the economy. Besides, the government should also adopt a clear-cut policy on safety standards and protection of environment.
According to CCP, in the absence of rules and regulations and benchmark of quality for four-wheel vehicles, most of the local brands lack modern safety equipment. The auto manufacturers should voluntarily adopt prevailing safety and quality standards and the permission to import new cars will provide a level playing field for the foreign brands. In a competitive auto market, the local manufactures will be compelled to adopt new technology and the consumers will have a vast choice to buy a vehicle. This will also rationalise the prices of vehicles and an increased demand for standard vehicles in open competitive market. The permission to import used car under the gift and personal baggage schemeincreasestransactional costbecause of legal formalities and import duties. The report recommends that this practice should be replaced with an open commercial import of used cars.
There is a weight in CCP’s recommendations as rising middle class in Pakistan needs four-wheel drive at competitive pricesand they deserve to be given a choice to buy cars.However, there are problems in this choice too. Those who go for this option should understand that there are issues in buying used cars such as short supply of spare parts, lowre-sale value and wear and tear. The government should also set its auto policy in line with other automotive manufacturing countries and remove bottleneck in the promotion of auto industry in Pakistan. The commission is also right in recommending end to regulating policies through SROs. The safety standards should meet acceptable criteria in line with the European Union and North American standards. The government effort to protect local industry will limit the scope of automobile industry in Pakistan and foreign investment in this sector.