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Auto Parts Makers Fear They Will Go Bankrupt

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Pakistan’s auto parts manufacturers have said that they are facing the worst crisis in history as small units in the industry are going bankrupt because of the domino effect of currency depreciation, spiraling inflation, rising freight costs, escalating utility tariffs, mounting bank interest, skyrocketing material cost and working capital crunch.

These views were expressed by the speakers at a seminar organized by the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM). The seminar was attended by a large number of association members, who fully agreed that it was the worst crisis in the history of Pakistan’s auto industry.

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There was discussion on the current economic situation, especially the freezing of major cost elements by the original equipment manufacturers (OEMs), which had become a burning issue for all the parts makers. PAAPAM Chairman Abdur Razzaq Gauhar and Senior Vice Chairman Abdul Rehman Aizaz asked the OEMs (local assemblers) to justify their unwillingness to accept the request of vendors about better profit margins, instead of freezing them, in the wake of rising input costs.

Association members called for giving compensation for the increase in costs that could not be recovered through the meager profit margins, which had been frozen for the past many years. They unanimously sought urgent support from the OEMs who, they said, had been supplied high quality parts by all PAAPAM members at very reasonable prices.

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Seminar participants conveyed to the OEMs that unless they supported the auto parts makers at the current critical juncture through adequate compensation to offset the impact of hyperinflation, rupee devaluation, increase in freight, utilities, interest and material costs, and paucity of working capital, their production lines would come to a complete halt.

Consequently, the OEMs’ assembly lines may shut down and the worst case scenario could be that the automakers may have to import auto parts at exorbitant prices on account of heavy freight costs and high duties. PAAPAM members also demanded immediate increase in their margins.

Source: Express Tribune

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