Car manufacturing halted as banks not opening LCs to import raw material

PAAPAM appeals govt to resume 50% import quota for auto raw material, CKD

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As the car manufacturing in the country has almost closed down due to non-availability of raw material, the Pakistan Association of Automotive parts and Accessories Manufactures (PAAPAM) Chairman Munir K. Bana has appealed the government to resume the opening of letter of credit (LCs) or minimum immediate import resumption of at least 50% of YOY raw material and Completely Knocked Down (CKD) Kits until the situation gets normal. “Our current position is that the Industry wants to keep itself afloat instead of any closure as that would be a national loss.

In an emergent meeting which was held here at PAAPAM Office the Chairman Munir K. Bana requested the Prime Minister, Minister Finance, Minister MOIP, and EDB to urgently take stock of the auto sector and help it out of this critical situation, as the restrictions on import materials have hit the auto industry hard. PAAPAM Senior Vice Chairman Usman Aslam Malik observed that the auto industry could not resist closure in absence of basic raw materials of OEM CKD. In July 2022, an Import quota regime was affected, leading to a 50% reduction in production. At least during this period, the Industry was able to marginally keep afloat. However, from January 2023, since the responsibility of LCs opening for import of industry raw material has been shifted to the commercial banks the entire car manufacturing has come to a grinding halt, as the banks are not ready to open LCs.

Other senior leadership of the PAAPAM pointed out in the meeting that the auto industry is a globally networked sector with a global supply chain. Once Pakistan gets off this network, resumption would become very difficult. “We are very, very concerned that the government is not apprehending or understanding the serious damage that is being affected by these restrictions on the image of Pakistan.

These are unwise decisions and need to be rolled back immediately,” commented Chairman PAAPAM.

The participants of the meeting observed their grave apprehensions on the noting daily melting away of the industries assets values due to the falling exchange rate coupled with lay off of trained and skilled employees to the tune of 150 – 200 daily who are not sustainable due to no work and observance of “no production days.”

The government’s own tax collection has taken a massive dip as the auto sector contributed a huge amount every month to the national exchequer. The participants of the meeting observed that on one side, 35%-38% of the vehicle prices are now multiple taxes that have been imposed by the government, and on the other hand, restriction to import materials has put the auto sector in a precarious situation. Without basic raw materials of OEM CKD, how would the Industry resist closure, PAAPAM questioned?

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