Car manufacturers seek clarity on incentives for new entrants

• PAMA writes letter to EDB regarding clarity of dates
• Official says AIDC meeting’s minutes indicates govt is favouring a manufacturer
• Official says a new entrant is selling and booking vehicles without having a plant in Pakistan

LAHORE: Car manufacturers have asked the Engineering Development Board (EDB) to specify the cut of dates for them to seek benefits under the Auto Development Policy (ADP) 2016-21 being offered to new entrants, reported The News.

The Pakistan Automotive Manufacturers Association (PAMA) have sought clarity on the dates in a letter written to the EDB on February 8.

The official, who told the publication about the letter, said that the Auto Industry Development Committee’s (AIDC) 34th meeting’s minutes indicated that the government is giving favour to an unidentified manufacturer.

The official told the publication that right now a new entrant in the market is selling and booking its vehicles without having a plant in the country. He added that under the government policy, every new entrant is allowed to bring 100 CBUs for product development and marketing.

“That the maximum incentive period is five years, in case of greenfield, and three years in case of brownfield, thus for those approved companies, which will start their commercial operations after June 30, 2021, the break-off dates (counted from the end date of the AOP i.e. June 30, 2021) shall be June 30, 2024 and June 3, 2026, respectively. The companies who have already started their commercial production before June 30, 2021, their incentive shall not go beyond their approved five-year business plan,” read the minutes of the meeting.

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The minutes also show that the government has decided that companies who have already started their commercial production before June 30, 2021, will not be allowed to change their business plan without proper justification.

It further read that failure to do so will result in the withdrawal of the incentive under clause 4.4 of the ADP 2016-21.

The clause related with the withdrawal of incentive stated: “In case of material deviation from the approved commercial operation schedule, withdrawal of incentives shall take effect...”

The PAMA, in its letter, stated that the new entrants already in production shall be entitled to avail concession for five or three years, as the case may be, counted from the date of commercial production.

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“However, these new entrants, also, reportedly, submitting revised business plans for the new models. This, submission of revised business plan, by those who have already attained commercial production, may circumvent the incentive period that may end up being more than five or three years,” it added.

“There is done deal once in commercial production, yet the submission of revised business plan may revive incentives that may, therefore, exceed the prescribed periods stated above,” it said.

The PAMA further said in the minutes of AIDC meeting it was stated that: "In that case new entrants can respond/submit application finalise plans by 30th April 2021”, which needed to be clarified.