Shipment delays threaten auto parts supply chain

Parts makers may pass on impact to customers through price hike

KARACHI:

The supply chain of automobile parts is likely to be disrupted owing to delay in shipments coupled with a hike in freight charges over the past two months, said Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) former chairman Mashood Ali Khan.

Talking to The Express Tribune, he said that the two factors would act as a hurdle in the way of a smooth supply chain of auto parts manufacturers and they would be forced to pass on the impact to their customers in the form of price hike.

“If we cannot control these basic parameters, then shortages are inevitable,” he noted. “Shipping expenses, which are often disregarded for having little influence on inflation, are now becoming the centre of attention for economists.”

He added that many industries were trying to work on these costs as they were reducing their profit margins. He pointed out that some companies had halted exports to certain countries while others were seeking commodities or raw material from areas close to the region.

“The current cost of vehicle parts and the time taken for their delivery have increased,” said Khan. Earlier, it took 25 days for a shipment to arrive in Pakistan from Qingdao Port, China but now it takes almost 60 days. “A 40 feet container used to cost around $2,000, but now it is priced at $11,000,” he said.

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On the other hand, shipments from Thailand to Pakistan consumed 12 days earlier, however, now it takes 35 days for a container to reach Pakistan. “The price of a container from Jakarta has soared to $4,500 from the earlier $800,” he said.

Similarly, the time taken by containers from Indonesia to reach Pakistan has jumped from 35 days to 50 days while the price has skyrocketed from $3,200 to $11,000. “This is just a small glimpse of the bottlenecks in supply chains that industries in Pakistan are facing,” he said.

“The biggest dilemma is that the entrepreneurs cannot forecast what will happen in the next six months.”

He regretted that the cost of doing business was quite versatile and difficult to sustain right now. Arif Habib Limited analyst Arsalan Hanif said that increase in prices of automobile parts would be unavoidable and uncontrollable because of higher freight charges and congestion at ports.

“This will also affect capacity utilisation of automobile manufacturers and increase the delivery time of vehicles,” Hanif said. Association of Pakistan Motorcycle Assemblers Chairman Sabir Shaikh said that the disruption to supply chains posed huge problems for small vendors.