The government is considering the option of forcing local car assemblers to pay “interest” on the upfront money they collect from customers,in case they fail to deliver vehicles in a stipulated period, according to a proposal in the new auto policy. In market parlance the amount is known as “Own”
Officials at the Ministry of Industries and Production stated that the government was keen on implementing a fixed time-table on vehicle delivery.
“The government is likely to fix the maximum time of delivery at one month,” officials said, adding that car assemblers would have to pay interest rate at Karachi Inter Bank Offer Rate plus 3% on the collected advance money and the issue would be settled at the time of final payment.
The proposal is a response to issues of late delivery on part of local car assemblers, who often take more than a few months despite taking upfront or booking payment from customers. The delay forces customers, looking for prompt delivery, to turn towards dealers who charge a ‘premium’ upto Rs300,000 depending on the vehicle.
However, an official at the Indus Motor Company said the delay is due to excess demand.
“We usually fix the period of delivery at the time of booking and keep our promise,” said the official. “We deliver the vehicle during the month we state and don’t take 100% upfront payment.”
Consumers, on the other hand, say the delay could be of several months. “They [local car assembler] took Rs500,000 from me in September, promising delivery in January,” said a customer. “They kept the promise but took the remaining amount in December. Four months is too long a time to receive a vehicle.”
Officials said the Ministries of Commerce and Industries backed the “paying interest” proposal to make it a part of the new auto policy.
In February, the government took notice that a particular assembler took four to five months to deliver vehicles to consumers. The Engineering Development Board (EDB), in a letter, called for immediate action in this regard. It further sent a copy of this letter to the Competition Commission of Pakistan.
The EDB also took notice of the hike in car prices and directed a cut following the depreciation of the Japanese yen.
At present, the CCP is finalising an assessment study on the automobile sector and is also dealing with a case alleging formation of a cartel by the car dealers.
The government was also asked to notice monopolistic practices of local car assemblers who had not cut prices and adopted delaying tactics in delivery.
The Ministry of Commerce has already expressed serious reservations over high prices and poor quality of locally-assembled vehicles.
According to officials, the Federal Board of Revenue has also argued that the government had incentivised the local car industry but it had not delivered on its promises.
