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Karachi, March 07, 2019 (PPI-OT): Finance Supplementary Bill brings relief for Autos

The second Finance Supplementary Bill (mini-budget) was passed yesterday which brought in various measures to boost productivity, where major positives were introduced for the automobile sector in particular. Following are the key measures announced for the automobile sector.

Decision to remove restriction of purchase of new, locally manufactured cars by non-filers: It was being rumoured in recent days that non-filers would be permitted to purchase cars up to 800cc engine size. However, in a surprise move, the restriction on non-filers has been removed for all engine sizes. We view this as positive for all auto assemblers, particularly Pak Suzuki (PSMC), who witnessed the most significant decline in sales from the time when this restriction was first announced in Apr-2018. Moreover, the restriction has been removed only for locally assembled vehicles, which is a further boost for local assemblers as the restriction remains in place for imported CBUs.

FED increased on imported luxury cars: Federal Excise Duty (FED) has been increased for 1,800cc to 3,000cc from 20% to 25%, whereas FED on engine sizes over 3,000cc has been increased to 30%. This measure will prove positive for local variants such as Civic (Honda Atlas, HCAR), Toyota Altis Grande (Indus Motor, INDU) and Toyota Fortuner (INDU) which fall in over 1,800cc segments.

FED imposed on local luxury cars/SUVs: FED has been imposed @10% on engine sizes above 1,700cc (previously it was going to be 1,800cc) for locally assembled vehicles. This will be negative for Honda Atlas (HCAR) and Indus Motor (INDU) since Civic, Fortuner and Altis Grande are above 1,700cc.

Other positive measures for autos: Other measures include (1) Non-resident Pakistanis holding international passports can purchase motor vehicles without filing requirements, and (2) removal of RD on input materials under SRO 655(I)2006.

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