The auto industry is in shambles for several months, mainly due to the non-issuance of Letters of Credit (LCs), issues in imports, and a cash-strapped economy. The State Bank of Pakistan (SBP) has not issued LCs to car companies to import the CKD kits, while the auto parts makers are facing issues in the import of raw materials. This has led to serious problems in the industry, including production plants shut down, the release of the workforce, and a shortage of new locally assembled vehicles in the market.
Addressing the issue, the auto parts makers have presented a significant demand to the government for their survival in the industry. As per economist Abdul Rehman, the auto parts manufacturers have asked the government to provide $125Mn/month import quota to operate at a breakeven level. “Lackluster automobile demand & classification as “non-essential imports has jolted the industry,” he wrote.
The economist further said 1500+ Small and Medium Size Enterprises (SMEs) are at risk. Once a business shuts down, it is unlikely ever to return.
Auto part manufacturers demanding $125Mn/month import quota to operate at breakeven level‼️
Lackluster automobile demand & classification as "non-essential imports" has jolted the industry
1500+ SMEs at risk. Once a business shuts down, it is very unlikely to ever come back
— Abdul Rehman (@AbdulRehman0292) April 17, 2023
Auto Parts Makers At Fault?
This tweet highlights our industry’s plight, which is on the verge of collapse. However, some believe the industry needs to look into its own major flaws, including lack of deletion even after four decades of subsidies, high protection barriers, and tax irregularities due to industry pressure to have filer and non-filer categories.
Due to the unstable conditions, it was reported that 250,000-300,000 direct and indirect jobs were lost in February 2023. Furthermore, the experts believe 2023 will be the most challenging year for the car industry, and the circumstances are going from bad to worse as there seems to be no respite for the sector, especially for Big 3 and auto parts manufacturers.
Due to this situation, it can be easily predicted that the car industry will need at least two to three years to come out of this pit.
What is your take on demand by auto parts manufacturers? Is it justified? Please share your thoughts in the comments section
