Automotive Development Policy – A Brief 1

Policy Objectives New investment in automotive sector for:- – Enhanced Consumer welfare – Increased Competition – Attracting new entrants – Greater localization of parts – Employment generation

Salient Feature BOI to provide single point of contact / one window facility for all prospective investors Incentivizing setting up of new plants by makes hitherto not in Pakistan – Greenfield Investment Incentivizing revival of closed units Lower tariff on cars to increase consumer benefits Tariff reduction on parts without impacting the viability of local industry

Investment Categories Category A - GREENFIELD Installation of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles of make not already being manufactured in Pakistan [Note: “Make” is defined as any vehicle of whatever variant produced by the same manufacturer] Category B - BROWNFIELD Revival of an existing assembly and/or manufacturing facilities, that is non-operational or closed since before June 30, 2013 and the make is not in production in Pakistan since that date, either independently by original owners or new investors or under joint venture agreement with foreign principal or by foreign principal independently through purchase of plant

Incentives (Cat – A) Duty free import of plant and machinery for setting up the assembly and/or manufacturing facility on a one-time basis. Import of 100 vehicle of the same variant in CBU form at 50% of the prevailing duty for test marketing after ground breaking of the project. (continued)

Incentives (Cat – A) Concessional rate of custom 10% on non- localized parts 25% on localized parts for a period of five years Import of all parts (both localized and non- localized) at prevailing customs duty applicable to non-localized parts for manufacturing of trucks, buses and prime-movers for a period of three years For Motorcycle industry, existing policy as approved by the ECC and notified by FBR vide SRO 939(I)/2013 and SRO 940(I)/2013 shall continue

Incentives – Cat B Import of non-localized parts at 10% rate of customs duty and localized parts at 25% duty for a period of 3 years in respect of Passenger Cars and LCVs. Import of all parts (both localized & non- localized) at prevailing custom duty applicable to non-localized parts for a period of 3 years in respect of Buses, Trucks and Prime Movers.

Tariff Roadmap - HighlightsRoadmap A protection of minimum 15% of Custom duty to localized parts Custom duty on cars up to 1800 cc to be reduced by 10% for CKD rate of duty of both localized and non- localized part to be unified into a single rate of duty after five years of policy period and kept as prevailing rate of duty of localized CKD at that time. – present duty structure shall continue for seven years for new investors

Eligibility Criteria A new investor shall be required to submit a detailed business plan and relevant documents for manufacturing of vehicles to EDB for assessment. EDB shall verify the investor’s in-house assembly/manufacturing facilities for the manufacture of road worthy vehicles. EDB shall determine eligibility of the applicant under the defined criteria to be declared as New Investor in any of the two categories. Ministry of Industries and Production on the recommendation of EDB shall approve new investor under the relevant category. AIDC and EDB shall review results of the new investors policy once every two years and shall recommend modification, if any