Vendors demand $13m to keep automobile sector functional

Consignments stuck at ports, hindering production of vehicles at OEMs

LAHORE:

The Pakistan Automotive Manufacturers Association (PAMA) has drawn the attention of the governor State Bank of Pakistan (SBP) to the scarcity of imported sub-components, components and sub-assemblies, and has urged the SBP and EDB/MOIP to intervene and allocate a minimum quota of $13 million per month for the bare minimum working of all segments of the automobile sector.

In a letter to the SBP Governor, Jameel Ahmad, PAMA Director General Abdul Waheed stated that the consignments of automotive vendors are stuck at ports, hindering the production of vehicles at OEMs due to MOQ (minimum order quantity) limitation. A simple monthly average formula for foreign exchange allocation will not work with auto parts makers.

“It is therefore suggested that a fund allocation be worked based on a quarterly basis with a liberty to each supplier for monthly adjustment to meet actual requirements. Kindly note that after clearance of the backlog, imports will automatically be adjusted to 50% of OEM production level,” said Waheed.

He added that a quota of $8.59 million has now been allocated to vendors from September instead of July which is resulting in a shortage of parts. The PAMA DG mentioned that SBP imposed restrictions on modes of payments via an EPD circular letter No 11 dated July 5 and later OEMs, SBP, MoF, and EDB/MOIP reached an understanding regarding the foreign exchange allocation and now SBP is releasing foreign exchange at the rate of 50% of 4 months’ average from July-2022 onwards.

“The OEMs later started receiving funds and getting their CKD consignments cleared from the port. But this understanding was not available to automotive vendors,” noted Waheed.

“In light of the above explanation, we request you to allocate a quota to auto parts manufacturers from July instead of September to synchronise their supplies with OEMs. Vehicles can only be assembled when both imported and locally produced components are available,” read the letter from the PAMA.

Published in The Express Tribune, September 17^th, 2022.

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