Parts industry seeks meeting with Dar to avert closure

Appeals for removal of auto sector from ‘nonessential import items’ list

LAHORE:

Auto parts manufacturers have sent an SOS to Finance Minister Ishaq Dar, appealing for the removal of auto and auto parts industries from the “nonessential import items” list. They emphasised that auto manufacturers had saved foreign exchange of $1.5 billion per annum through import substitution and contributed over 5% of the country’s tax revenues.

Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Chairman Munir Bana told Dar in the request that their manufacturers “provide employment to over 3 million Pakistani workers, but they are currently facing layoffs as the entire sector is on the verge of collapse”.

Paapam is a representative body of 350 tier-I and 1,200 tier-Il auto parts manufacturers spread all over Pakistan. The association stressed that all banks should open Letters of Credit (LCs) for imports because the industry was at risk of permanent closure amid rising inflation, rupee devaluation and record high markup, making it impossible to continue operations. However, due to the State Bank of Pakistan’s (SBP) policies, commercial banks are not willing to open LCs.

Paapam requested for a quick meeting with the finance minister to brief him on the auto industry’s current trauma. Bana warned that unless immediate counter-measures were taken, the industry would shut down, leading to millions of job losses, rollback of localisation measures and repatriation of foreign investment by all automotive assemblers.

“Auto industry needs support from the government and the SBP, through the easing of restrictions on imports of completely knocked down (CKD) kits by assemblers, as well as imports of raw material by parts makers,” he said. “This will help improve volumes to a certain extent and assist the industry in sustaining its operations at the breakeven level.”

According to Bana, the industry needs approximately $125 million per month to survive through breakeven capacity utilisation. “Our members are manufacturers and suppliers of thousands of locally produced auto parts and components worth over Rs150 billion per year to all foreign assemblers of passenger cars, light commercial vehicles, motorcycles, tractors, trucks and buses.” Paapam chairman added that their members were producing components as per global quality standards, tested and approved in line with Japanese, Korean and Chinese specifications.

According to the letter, the situation has continued since May 2022, resulting in drastic reduction of over 70% in production of all types of vehicles. “We have been forced to downsize our operations and lay off our trained workforce.”