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Running Head: INCREASING TREND OF IMPORTED CARS 1

Increasing trend of imported cars in Pakistan during 2007-2017


Muhammad Noyan
Muhammad Tauqier
Umar Farooq

Ms. Samia Amjad


Academic Writing, D
SSC 204
March 29, 2018
Lahore School of Economics
INCREASING TREND OF IMPORTED CARS 2

TITLE: INCREASING TREND OF IMPORTED CARS IN PAKISTAN DURING


2007-2017

INTRODUCTION:

Background and Context: Auto industry is referred to as “industry of industries” in the


developed world. Pakistan is among the selected few group of 40 countries who manufacture
automobiles. The auto industry of many regional countries has played a pivotal role in
transforming those countries into economic tigers. Unfortunately the pace of this happening in
Pakistan has been very slow. The import of cars has increased significantly in last ten years
which shows inverse relationship between production of domestic vehicles and parts, and import
of vehicles and auto parts. Even though Pakistan has banned commercial import of used vehicles
but it is happening. The reason is that unlike regional countries Pakistan has weak system to
ensure that policy of Transfer of residence and gift & baggage schemes are not misused. There
are no technical barriers or standards being applied by Pakistan that these schemes are not
misused. There is no auto policy in the country also to implement safety and quality standards
for local manufacturers and imported vehicles, which is required on the earliest. In Pakistan
mostly used cars are imported and this trend is increasing rapidly. According to the data, last
year Pakistanis imported 65,723 units of cars and minivans, which is 70 percent increase in
import if we compare the import figure of 2017 and 2016. Moreover, imported SUVs and
Pickups also saw 59 percent and 9 percent increase in 2017, which is astonishing

Statement of problem: The main purpose of this research is to highlight the impact of importing
cars on local auto industry and government revenue. We will discuss both positive and negative
impacts of importing cars. This research will also explore the impacts of importing cars on
environment and show how it is decreasing the air pollution. Our research will also include the
questionnaires that will let us know that how a common person think about this increasing trend
of importing cars. This will also show the problems being faced by the showroom owners that
deal in local cars. Along with this it will also be discussing about the government policies
regarding this problem and that how government is somehow involved in this. This will also
discuss about the problems being faced by workers in local industry. Along importing cars, we
INCREASING TREND OF IMPORTED CARS 3

also need to import their parts which becomes another expenditure of our total revenue. Research
will also highlight major reason that why people are preferring imported cars on local cars and
what are the solutions for this increasing trend. This research will also show that why everyone
should know about the current situation of country’s economy.

Significance of study: The main purpose of this study is to prove that how our local market has
become a mafia and due to which people are preferring imported cars on them and how this trend
is causing a negative effect on our country’s revenue and causing unemployment. The purpose of
this research is to show the impact of imported cars on local market and how imported cars have
changed the trend of local auto industry. This research will try to suggest some solutions for this
problem and what role government, local industry and public can play collectively regarding to
this. Pakistan is a developing country and it is passing through a critical stage of economy. It is
very important to decrease trade deficit, this money can be spent on other different projects and
to improve our infrastructure. Too many old and un-maintained vehicles along with growing
numbers of used imported/smuggled cars is an increasing burden on the economy and is a safety
hazard. In recent past, several accidents on Motorways & Highways that have resulted in
hundreds of fatalities are seen as a direct result of lack of regulations vis-à-vis vehicle safety &
maintenance. So this research project will cover all factors related to the topic.

LIMITATIONS: This research covers almost all the major advantages and disadvantages of
importing cars. But there were some difficulties in it like government officials don’t agree to
give interview and even if they do agree it is very difficult to get an appointment. Showroom
owners also think this as waste of their time and don’t pay much attention to the questions being
asked. Finding accurate statistics were also very difficult as there was different data on different
websites.
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LITERATURE REVIEW:

This research paper includes published and unpublished research studies of direct and indirect
involvement of local mafia and government policies in this regard. Many articles are written
about its trend and impacts in known newspapers. Government policies regarding to this issue
and their impacts on the revenue has also been shown in articles. Their references are given
below:

 “We just want to discourage unnecessary imports at this time to curtail the growing
trade deficit,” (Younus Dagha, Commerce Secretary), Government officials are of the
view Pakistan is importing too many cars. So if it succeeds in reducing used car
imports for the next few months, it will help reduce the country’s trade deficit in the
current fiscal year ending June 30, 2018.
 “Although the total market size has grown, there are both positive and negative aspects of
the import of used vehicles”,(Aamir Allawala), Local car manufacturing involves three
million jobs in assembly and vending units and provides an avenue for massive long-term
investment by global auto giants.
 “I don’t think the government will be able to generate even Rs1 billion by increasing
the duty because the country hardly imports 1,000 new cars per year”, (HM Shahzad),
The automobile industry believes the government may have succeeded in reducing
some import of new vehicles, but it may not be able to generate enough revenues by
increasing the regulatory duty on the import of cars.
 “Time has come for the existing players to make prompt investment in capacity
expansion, improve localization, introduce new models and reduce delivery time to
eliminate the menace of premium,”,(Aamir Allawala), In the near future, Hyundai, Kia
and Renault will set up plants in the country.

RESEARCH QUESTIONS:
Following are going to be our major questions under discussion in this research
project:
 Why is the trend of importing cars being increased in Pakistan?
INCREASING TREND OF IMPORTED CARS 5

 What are the causes of this increasing trend?


 What are the effects of this increasing trend on:
1. On Local Industry
2. On Government Revenue
 Government role in this regard

METHODOLOGY:
Both primary and secondary research methods are used for this research project. Production
data of all 5 sub-sectors of vehicles will be analyzed. Present import tariff structure and
process and policy of import of used cars will be analyzed. Interviews with the common
people who are buying imported cars as well as showroom owners and government officials
are a part of this research. For primary data collection questionnaire and surveys are used
whereas for secondary research different journals and articles are reviewed. For an accurate
understanding of problem, questionnaire is filled only from serious and honest persons.

TIME FRAME:

Pilot study: 2 days


Questionnaire: 4 days
Filling questionnaire: 1 week
Collection of result: 1 week
Analysis and compilation of results: 1 week
Total time: 1 month

References:

Farhan Zaheer, “Imports of used cars only discouraged, not stopped”, The Express Tribune,

(Nov 30, 2017)


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Aamir Shafaqat Ali, “Used car imports claim bigger chunk in auto sales”, Dawn,(Jan 20,

2017)

Farhan Zaheer, “Duty on car imports unlikely to generate much revenue”, The Express

Tribute, (Oct 19, 2017)

Aamir Shafaqat Khan, “Imports of used cars in Pakistan jump 70pc”, Dawn, (Jan 26, 2018)

Appendix:

Interview Questions
1) How local manufacturers and imports are meeting the demand of cars in Pakistan?
2) Can we call our automobile manufacturing sector an industry?
3) What are the benefits of imported cars for the economy and for the citizens?
4) Why do you think local assemblers have not been able to reduce the prices of their
cars?
5) Is it true that more people now prefer imported cars over local cars?
6) What would you say to people who believe the used car imports are illegally brought in
the country through the Overseas' Pakistani schemes and they have created a black
economy of sorts?

Questionnaire:

1) Would you prefer imported car over local manufactured car?


2) What are the impacts of imported cars on local industry?
3) Are the imported cars beneficial for Pakistan?
4) How is it beneficial for Pakistan’s economy?
5) Does the tax on imported cars should increase?
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6) What are the impacts of imported cars on local industry?


7) Is the trend of importing cars increasing?
8) Should government apply quota parallel to taxation?
9) Do you find maintenance of imported cars difficult?

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