Thousands are Laid Off by Auto Industry as Sales Reach a Record Low

In recent months, Pakistan’s automotive industry has laid off thousands of workers as sales of automobiles and replacement parts have dropped massively due to a government prohibition on raw material imports, a significant depreciation of the currency, and surging inflation.

This was revealed by Munir Karim Bana, chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), who was speaking to Arab News in an interview. Bana said:

“We have retrenched thousands of workers in recent months as our production has virtually come to a halt. There is no buyer now as auto manufacturers have shut down their plants.”

He highlighted that PAAPAM supplies the auto sector with around 90% of its local vehicle parts. However, as raw materials worth billions of rupees were stuck at the Karachi port, auto parts firms were paying demurrage, a fee payable to the owner of a chartered ship for failure to load or discharge the ship within the time stipulated, according to Bana.

Related: April Saw an Over 80% Decline in Auto Sales

“We have been paying interest on our loans from the banks, our material is getting devalued but there is nobody to listen to our grievances,” Bana lamented. With production units closed, income streams were drying up, he added.

“We were profitable and paying taxes to the state as all our sales are documented and tax paid. But we are bankrupt now, and there is hardly any chance of revival of our industry in the coming years.”

According to Rana Ihsan Afzal, the coordinator to Prime Minister Shehbaz Sharif on commerce and industry said the automobile industry in Pakistan was import-dependent and dollar intensive, “so we may not be able to run it at its full efficiency until the revival of the IMF bailout program.” A staff-level agreement on the 9th review of an IMF bailout deal has been delayed since November. “We have to protect our foreign exchange reserves at this stage by keeping a check on the import of the raw material for the industry,” Afzal said.

Commenting on the decline in sales and the mass layoffs, the PM’s coordinator called it “unfortunate,” while assuring that the government was “working round the clock to revive the economy.” However he is hopeful of the future calling it “a temporary phase in which we have to stick to some import restrictions for the automotive industry, but when our reserves build up, we will be seeing a boom in the auto industry again.”

Related: Pak Suzuki in Dire Straits

Meanwhile, vehicle sales have dropped by almost 70% in a year, and some manufacturing units have been closed for several months, according to Abdul Waheed, a representative for the Pakistan Automotive Manufacturers Association (PAMA). “The current political and economic environment in Pakistan doesn’t favor industrial production as the consumers’ backbone has broken with soaring inflation and rupee devaluation”, he added.

khi port

Pakistan is facing its most daunting economic crisis to date, with foreign exchange reserves held by the central bank (most of which were aided by the ally countries) falling to $3.5 billion, barely enough to cover three weeks of imports, and the currency plummeting to historic lows against the US dollar (being traded at Rs 312/ $1 as of putting down this article). Inflation meanwhile soared to 36.4% in April, the highest in the country since 1964.

Source: The News

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