KARACHI, Feb 3: An estimated 150,000 workers have been laid off by the auto vendors and assemblers in the last few months in the wake of persistent fall in sales of cars.
“About 20-30 per cent of the workers are feared to be fired in the next few months in case the slowdown in the car industry lingers on,” an executive committee member of Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam), Razak H. Bengali said.
He said most factories running three shifts until a few months back had been forced to shed workers and slash the number of shifts to one or two due to sharp decline in car demand.
The Paapam member in a letter on Feb 2 to various ministries and the governor SBP said that the rising prices of cars due to over 28 per cent depreciation in rupee against the dollar and 58 per cent against the Japanese yen, galloping inflation, high rate of interest, restriction on leasing and imposition of five per cent excise duty, withholding tax and increase in sales tax can be blamed for drop in demand of cars.
He said car sales had plunged by 47 per cent to 41,972 units in July-Dec 2008 as compared to 78,759 units in the same period of 2007.
Mr Bengali recalled that the Engineering Development Board (EDB) had devised a fiveyear plan envisaging the car production of 500,000 units by 2010 in view of shortage of vehicles. A target of 248,000 units of cars/LCVs was set for 2006-07, thus predicted to rise to 276,000 units in 2007-08. The target for 2008-09 was 348,000 units.
He added that this was only possible after heavy investments by assemblers and vendors, acquisition of latest technology, R&D and expansion in existing capacities in view of increasing demand of cars under the five-year plan.
In 2008, steel prices surged substantially causing price hike in basic and auxiliary materials. Consequently, the auto vendors were forced to build a high priced inventory to cater to the increasing demand of cars. But suddenly global economic recession hit the developed and developing countries.
He said the auto vendors and manufacturers now find themselves in hot waters due to alarming decline in demand of cars as both have to pay high interest for the loans, which they had taken for long-term capital investments made in the auto sector.He urged the government to provide some relief in the payment of principal amount for a minimum period of one year to those companies, which had invested heavily in plant and machinery through long-term financing from the banks. These companies may also be allowed reduced rate of interest so that they could absorb the current crisis.
Mr Bengali said that the government should save the auto makers and vendors by some rescue package, otherwise the local companies would face the same crisis, which has hit the leading car makers in foreign countries.
karachi, feb 3: an estima- ted 150,000 workers have been laid off by the auto vendors and assemblers in the last few months in the wake of persistent fall in sales of cars. “about 20-30 per cent of the workers are feared to be fired in the next few months in case the slowdown in the car industry lin- gers on,” an executive commit- tee member of pakistan associa- tion of automotive parts and ac- cessories manufacturers (paapam), razak h. bengali said. he said most factories run- ning three shifts until a few months back had been forced to shed workers and slash the number of shifts to one or two due to sharp decline in car de- mand. the paapam member in a let- ter on feb 2 to various minis- tries and the governor sbp said that the rising prices of cars due to over 28 per cent depreciation in rupee against the dollar and 58 per cent against the japanese yen, galloping inflation, high rate of interest, restriction on leasing and imposition of five per cent excise duty, withhold- ing tax and increase in sales tax can be blamed for drop in de- mand of cars. he said car sales had plunged by 47 per cent to 41,972 units in july-dec 2008 as compared to 78,759 units in the same period of 2007. mr bengali recalled that the engineering development board (edb) had devised a five- year plan envisaging the car pro- duction of 500,000 units by 2010 in view of shortage of vehicles. a target of 248,000 units of cars/lcvs was set for 2006-07, thus predicted to rise to 276,000 units in 2007-08. the target for 2008-09 was 348,000 units. he added that this was only possible after heavy invest- ments by assemblers and ven- dors, acquisition of latest tech- nology, r&d and expansion in existing capacities in view of in- creasing demand of cars under the five-year plan. in 2008, steel prices surged substantially causing price hike in basic and auxiliary materials. consequently, the auto vendors were forced to build a high priced inventory to cater to the increasing demand of cars. but suddenly global economic reces- sion hit the developed and de- veloping countries. he said the auto vendors and manufacturers now find them- selves in hot waters due to alarming decline in demand of cars as both have to pay high in- terest for the loans, which they had taken for long-term capital investments made in the auto sector.he urged the government to provide some relief in the payment of principal amount for a minimum period of one year to those companies, which had in- vested heavily in plant and ma- chinery through long-term fi- nancing from the banks. these companies may also be allowed reduced rate of interest so that they could absorb the current crisis. mr bengali said that the gov- ernment should save the auto makers and vendors by some rescue package, otherwise the local companies would face the same crisis, which has hit the leading car makers in foreign countries.