Auto part vendors see squeezed profits
Around 10-15% of auto part vendors are on the verge of shutdown, while the rest are under tremendous financial constraints due to squeezed profit margins amid rising input costs and cash flow constraints, said Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Chairman Abdur Razzaq Gauhar.
Speaking at a seminar organised by Paapam on Monday, Gauhar asked the original equipment manufacturers (OEMs) to pass on at least 10% of the net profit to vendors.
Criticising persistent rise in key policy rates, he underlined that the auto part makers were the worst affected segment and they had no financial support from OEMs.
“Auto part makers are getting no benefit rather, they are facing huge losses due to high production cost in the midst of soaring energy prices, constant hike in policy rates and mounting cost of raw materials.” Expressing dismay over excessive increase in the petroleum prices, he urged the government to save the industry from the adverse impact of high fuel prices.
On the occasion, the participants pointed out that on an average, raw material prices had risen by more than 159% (2.59 times) during the last five years. Moreover, electricity cost had skyrocketed by more than 76%, while gas rates had surged by 158% (2.58 times), they mentioned.
Petroleum prices, including lubricants and chemicals, had skyrocketed by 95%, they said adding that global freight costs had urged by 712.5% (8 times), proving destructive for the industry.
Adding to the woes, the rupee value had depreciated steeply against the US dollar, they lamented. The seminar titled ‘Identifying business challenges way forward’ was arranged to assess the financial health and profitability of the industry.
Besides Paapam chairman, Punjab Industrial Estates Development and Management Company (PIEDMC) Chairman Nabeel Hashmi and former Paapam chairman Usman Malik also spoke at the event.
Representatives of car, tractor and motorcycle sectors participated and expressed their concerns over the squeezing profit margins.
Published in The Express Tribune, January 4th, 2022.
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