By Ayesha Mudassar ISLAMABAD, Jan. 19 (INP-WealthPK): The sales of vehicles across almost all models posted a robust growth in the first half of the current fiscal year (1HFY22) due to improved purchasing power of consumers thanks to rapid economic recovery since 2020 when the Covid-19 pandemic peaked and took its toll on almost every sector of the economy. According to Pakistan Automotive Manufacturers Association (PAMA), the total car sales expanded to 114,765 units in 1HFY22 as compared to 67,026 units in 1HFY21. December sales rose to 24,462 units from 15,351 units in November 2021. The sales of trucks, jeeps, pick-ups, and tractors also showed an increasing trend in 1HFY22 in comparison with the corresponding period of last year. Similarly, production of cars expanded by 73% followed by 79% in trucks, 66% in jeeps and 15% in tractors. The auto production and sales were higher in December 2021 than December 2020. The automobile industry is one of the growing industries in Pakistan, employing a workforce of about 3.5 million people and accounting for 3% of the GDP. Its contribution to the national exchequer is approximately Rs50 billion ($310 million) annually. On December 16, 2021, the Economic Coordination Committee approved the Auto Industry Development and Export Policy (AIDEP) 2021-26 with the purpose to increase the annual production of automobiles from the current 250,000 units to about 600,000-800,000 units during the next five years. The other incentives the policy offers include reduction in the prices of vehicles, generation of 375,000 jobs, significantly decreasing import duties on electric vehicles from 25% to 10%, and also promoting manufacturing of hybrid electric vehicles locally. The policy encourages localisation and value addition of parts used in car manufacturing and promotes exports. Another reason for an increase in demand for automobiles is that China has allowed Pakistani stakeholders to import automobile parts and kits at a reasonable price under the China-Pakistan Economic Corridor (CPEC). The new auto policy goes on to address the auto sector stakeholders’ concerns that an increase in duties and taxes on imported and locally-assembled vehicles will bring auto sales under pressure. Notwithstanding the auto development policy, the government has increased different taxes on vehicles production and sale in the mini-budget to enable it to receive the much-needed funding from the International Monetary Fund. The government has increased the federal excise duty (FED) on locally-manufactured vehicles up to 5%. FED on locally-manufactured double-cabin vehicles has been raised to 10% from 7.5%. Moreover, general sales tax on automobiles has been enhanced to 17% from 12.5%. FED on import of vehicles of 1,000-1,799cc has been increased to 30% from 25%. The increases in different taxes will lead to huge increases in the prices of vehicles, leaving the lower-middle-income groups with little chance of owning a car. So, the government should try to implement the recently-announced auto development policy in letter and spirit to enable the automotive industry to play its due role in the economic growth.