ISLAMABAD, July 25: The Pakistan Association of Auto Parts & Accessories Manufacturers (PAAPAM) has said that auto parts industry is facing the worst crisis in the history of Pakistan as the domino effect of dollarization - spiralling inflation, rising freight rates, escalating utilities tariffs, mounting bank interest, skyrocketing material cost, and crunch of working capital - has pushed the SMEs in automotive parts sector into bankruptcy.

A seminar was organized by the PAAPAM on Monday which was attended by a large number of industry members. The participants had discussion on the current economic situation, specially freezing of major cost elements by the original equipment manufacturers (OEMs), which has become a burning issue for all the vendors. The discussion revolved around a single-point agenda as to how the vending industry can survive in the current circumstances, because the entire auto parts sector is in a gridlock.

PAAPAM Chairman Abdur Razzaq Gauhar and Senior Vice Chairman Abdul Rehman Aiza asked the OEMs to justify their unwillingness to understand and implement vendors’ requests to maintain historic profit returns, instead of freezing them permanently. They called for the compensation for cost increases which could not be recovered through their meagre profit margin. They unanimously sought urgent support from the OEMs, who have been supplied high quality parts by all the PAAPAM members at reasonable prices for last many decades.

The participants of the seminar conveyed to the OEMs that unless they rise to the occasion and support the automotive parts manufacturers at this critical juncture, the production lines would come to a complete halt. As a result, the OEMs’ assembly lines may shut down and in the worst-case scenario, the OEMs may have to import auto parts at exorbitant costs.

The general body of the PAAPAM members unanimously demanded an immediate increase in their margins through restoration of 10% profit on total cost of parts, working capital support through early payments of their bills, and unfreezing of all frozen cost elements to compensate for the extraordinary increases in all production inputs.

Credits: INP-WealthPk