With rupee fall, asset value of businesses melting

Auto parts manufacturers have expressed grave concern over the industry’s fast deteriorating situation due to the prevailing economic condition in the country.

At a meeting on Monday, office-bearers of Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) noted that the asset value of business was melting in the wake of falling currency exchange rate.

Apart from that, 150 to 200 trained and skilled employees were being laid off every day because of no work and non-production days.

Paapam leadership cited that the introduction of an import quota regime in July 2022 resulted in a 50% reduction in production. Yet, the industry was able to at least stay afloat.

However, since January 2023, when commercial banks were assigned the responsibility of opening Letters of Credit (LC) for import, the entire auto sector has come to a grinding halt.

They pointed out that the government’s tax collection had dipped, though the auto sector contributed a huge amount every month to the national exchequer.

On the one hand, government taxes accounted for 35- 38% of vehicle prices while on the other, restrictions were slapped on the import of raw material, pushing the auto sector into a precarious situation, observed the meeting participants.

Without basic raw material for the original equipment manufacturer (OEMs), how would the industry resist closure, questioned Paapam.

The auto industry is connected globally with a global supply chain. Once Pakistan gets off the network, the resumption of linkages will become very difficult.

“We are very concerned that the government is not realising that these restrictions are tarnishing the image of Pakistan. These are unwise decisions, which need to be rolled back immediately,” said Paapam Chairman Munir K Bana.

The meeting demanded the resumption of LC opening and import of at least 50% of raw material and completely knocked down (CKD) kits with immediate effect till the situation got back to normal.

“Our current position is that the industry wants to keep itself afloat and refrain from closing down as that will be a national loss," Bana stated.