According to The Nation article published on April 17, 2023, the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has sent an SOS to Federal Finance Minister Ishaq Dar, appealing to him for removal of imports of auto/auto parts industries from the ‘non-essential items’ list, as the auto parts manufacturers save valuable foreign exchange to the tune of $1.5 billion per annum through import substitution and contribute over 5 percent of the country’s tax revenues.
PAAPAM Chairman Munir Bana informed the minister that its members, the auto parts manufacturers, provide direct and indirect employments to over 3 million Pakistani workers, technicians, engineers and management professionals, who face layoffs as the entire sector is on the verge of closure. PAAPAM requested that all banks may kindly be directed to open all LCs for imports by genuine manufacturers, as the entire industry is currently faced with permanent closure, amidst rising inflation, devaluation of our currency and record high markup rate, making it impossible to maintain operations.
In the above letter, PAAPAM chairman observed, “Unless immediate counter measures are taken to save the “mother of all industries”, a massive tragedy would unfold, as the entire auto parts industry would shut down permanently, leading to losses of millions of jobs, rollback of localisation and repatriation of foreign investments by all the automotive assemblers.”
“The auto industry needs support from the government and the State Bank of Pakistan through easing of restrictions on imports of CKD kits by assemblers as well as raw materials by parts makers. This would help recovery of volumes to a certain extent and assist the industry in sustaining its operations at a breakeven level,” he added.
Munir Bana argued that the entire automobile industry needs approximately $125 million per month to survive through breakeven capacity utilisation. He said that PAAPAM is the representative of 350 Tier-I and 1,200 Tier-Il auto parts manufacturers located all over Pakistan. He emphasised that Pakistan is not just an automobile assembling country, as our members are manufacturers and suppliers of thousands of locally produced auto parts and components worth over Rs150 billion per year to all the foreign assemblers of passenger cars, light commercial vehicles, motorcycles, tractors, trucks and buses in Pakistan. “Our members produce components as per global quality standards, tested and approved on Japanese, Korean and Chinese specifications,” he maintained.
“Despite our humble contributions to job creation, GDP growth and domestic value addition, our industry is currently facing a life and death situation,” he said. Due to State Bank policies, Commercial Banks are not willing to open LCs for imports of our members’ raw materials and CKD components of automobile assemblers. The PAAPAM letter further stated that this situation has been persisting since May 2022 and has resulted in drastic reduction in production of all types of vehicles by over 70 percent. As a consequence, there has been a severe financial impact on the auto industry, particularly the SME auto parts manufacturers. We have, therefore, been forced to downsize our operations and lay off our trained workforce. The automotive assemblers and most parts makers are JVs with global companies with strong financial and technical resources. At the end of the letter, PAAPAM also requested an opportunity for a short meeting with the finance minister to enable them to brief him on the auto industry’s current trauma.
