Car analysts criticize the budget’s “faux pas”.

KARACHI:

Automotive sector analysts described the federal budget for 2024-2025 as a faux pas and called for the introduction of sustainable policies over 24 years for all industries, including the automotive sector. They stressed that the government must immediately involve the cabinet, political parties and industrialists in developing a long-term strategy.

Sustainability is crucial to the industry’s growth, but local policies change frequently, often after a bulletin is published, forcing business leaders to constantly adapt their decisions. This volatility makes doing business and investing in the country very risky. The automotive industry in particular has been facing challenges for the last two and a half years, and this could happen again next year.

Analysts called on the government to adopt serious austerity measures and sacrifices to boost the morale of residents, industrialists and the wage-earning class. These groups faced significant challenges, exacerbated by new payroll and industry-wide taxes in the budget.

Auto sector analyst and IBA adjunct professor Dr Aadil Nakhoda said the budget is likely to impact the purchasing power of car buyers as higher taxes may discourage them. However, the shift to price-based taxation may lead to dynamic changes, increasing the importance of price competition in price-sensitive segments.

The government has withdrawn several incentives for electric and hybrid vehicles, which may not be ideal given the need to adopt this technology. The government should consider easing import restrictions, especially parts and components, to allow the industry to recover economically and offer more options to consumers. A consumer-centric approach is necessary because consumers have already been burdened by inflation and taxes over the past few years.

Auto sector analyst Mashood Khan noted: “The budget is not adequate for the entire industry, including the struggling auto industry, which has been struggling for over two years. A commendable aspect is the slight restriction on new or used completely built-up units (CBUs), although this is not a long-term strategy. While this benefits the local industry to some extent, it is not enough.

The government must support local industries by providing incentives to boost industrialization and encouraging industrialists. The impact of the budget on the car industry is neutral; Industrialists already face challenges and are likely to continue to face them.”

Khan noted that the bicycle industry is doing better and the tractor industry has gained momentum. However, the lack of incentives for the bus and truck industries is disappointing. The government should have provided incentives to encourage people to buy local buses and trucks instead of importing them.

He stressed that the government, bureaucrats, policymakers and the Special Investment Facilitation Board (SIFC) must recognize that the industry is key to solving the economic crisis. To quickly boost industrial development, a 24-year industrial policy is necessary.v