In face of crisis, auto parts makers diversify business

Industry focuses more on new products, markets to ramp up exports

KARACHI:

The bruised auto parts manufacturing industry is seeking some solace by diversifying business and introducing some new engineering goods in the face of economic turmoil in the country.

Leading auto parts makers have lamented that the industry has been grappling with an unending series of crises for the last nearly one and a half year. The situation forced them to seek product diversification for an easy escape from industry troubles and ensuring their survival.

This product switch is providing them an opportunity to explore international markets and find buyers for new products. “Pakistan’s auto parts makers can significantly increase exports by focusing more on new products and markets,” auto sector expert Mashood Khan told The Express Tribune.

Citing an instance where a parts manufacturer had started producing and exporting various engineering goods, he said that the development would pave the way for the manufacturing of such goods that were required by other sectors as well.

“It is for the first time that an auto parts maker has started producing hydraulic punching and clinching machines. It has fetched export orders from the UAE that have been met successfully,” he pointed out. “It is obviously a big opening for us with a huge export potential.”

Former Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) chairman Abdul Rehman Aizaz told The Express Tribune that though diversification into other engineering fields was not new, “it has become a necessity for survival of the industry”.

“Parts manufacturers have diversified technologies. Be it forging, cast iron foundries, aluminium parts foundries, sheet metal pressing, plastic, rubber, precise machining, metal finishing or different coatings, we have all the capabilities.”

When questioned how he saw the shift in production, the ex-Paapam chairman called it a positive development. “Naturally, it is a good phenomenon but it doesn’t mean that auto parts making will be stopped due to diversification,” he elaborated.

JS Global research analyst Waqas Ghani Kukaswadia attributed the diversification to Pakistan’s persistently unstable economy. Rising inflation didn’t merely lead to increased cost of manufacturing, it also resulted in higher finance expenses and a less conducive business environment, he said.

The challenges confronting the manufacturing sector triggered demand compression, and combined with import constraints, led to overall reduction in economic activities. “This downturn has had a cascading effect, causing plant closures in some cases,” he observed.

"The auto part manufacturers are functioning as a silent but potent force that drives the industry forward," Paapam's executive board member Saad Sheerani noted.

They might be SMEs in scale, but their impact is profound. With each Original Equipment Manufacturer relying on hundreds of these suppliers, these smaller entities collectively employ vast numbers, enriching the national exchequer through taxes and promoting self-reliance via import substitution, he said.

Published in The Express Tribune, August 29^th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.