By Mansoor Ahmad
LAHORE: Around 32 auto parts’ vendors of original equipment manufacturers (OEM) have gone out of business as car assemblers forced the vendors to reduce the rates of locally produced parts.
The News has learnt that high growth in car production is a boon for the assemblers who are generating more profits, but a curse for the auto-vendors who have not even benefited from the waiver of import duty on their raw materials. The government granted the waiver to facilitate upgrading.
It was learnt that the assemblers succeeded in forcing the vendors to pass on the benefit of duty waiver on parts they supplied to them. Vendors do not dare to complain openly against the assemblers, as they fear losing orders.
However, vendors claim that the auto-vending industry has attained the capability to produce critical engine parts of world-class standard.
They said in the past the OEMs used to provide them with the sample of the part they wanted to be deleted. Now most of the top vendors have CAD-Cam apparatus on which they could produce dies and moulds of any part from drawings.
However they complain that after a number of vendors upgraded technology the auto assemblers stopped deletion process.
They pointed out that most of these vendors are exporting critical engine parts to the after sales markets and the buyers are satisfied with the quality.
However no OEM has asked them to produce these critical parts for the local models.
They said critical engine parts for even some the used old vehicles are also being produced.
The auto-parts vendors urged the government to devise a policy that promotes higher use of locally manufactured parts.
Vendors had increased their capacities in anticipation of higher production however, they said the production has increased but use of local parts has decreased.
They warned that more auto-vending units would close in next six months if right policies were not adopted.
The vendors complain that the government has fully implemented that part of long-term auto-policy that related to and benefited the OEMs.
However they deplore that the part relating to facilitation of local auto-parts vending industry was not implemented.
They said the vendors’ facilitation portion constitutes 70 per cent of the entire auto-policy.
Vendor’s technology upgrading fund is on paper but nothing is visible on ground. They said no serious efforts have been made for the development of auto-clusters.
The human resource development part of the auto-policy has also not been initiated neither any incentives been provided to local vendors in income tax for boosting their technology.
They said that government has also imposed one per cent excise duty on local parts as well. This additional duty they add is compensated by the OEMs but the local spare-parts market flooded with under-invoiced imports do not share this additional burden.
The vendors said the local auto-parts industry has not been able to penetrate the local after sales auto-parts market due to heaving under-invoicing of auto-parts.
They said under-invoicing is to such an extent that the landed cost of imported parts becomes lower than the cost of production of local industry.
The vendors said that the Federal Bureau of Revenue is aware of the menace of under-invoicing in auto-parts imports and its representatives have admitted this on many public forums but no remedial steps have been taken to stop this practice.