KARACHI: The automobile industry in Pakistan is facing a critical challenge and is urgently seeking relief in the form of export remissions for the fiscal year 2022-23.
Industry representatives are urging the government to address the pressing issue concerning the Manufacturing Certificates for Original Equipment Manufacturers (OEMs) to ensure uninterrupted operations.
The Pakistan Automotive Manufacturers Association (PAMA), a representative body for the automotive sector, has reached out to the Ministry of Industries and Production in Islamabad with a letter dated September 27, a copy of which is available with Business Recorder. In the letter, PAMA expressed its concern over an inconclusive meeting held on September 25 with industry representatives, where crucial decisions were unfortunately postponed.
The letter highlighted a significant impending date, September 30, beyond which all OEMs’ Manufacturing Certificates will expire. This will result in the inability to import materials, invoice ready products, and ultimately halt all industrial operations, leading to a complete shutdown of the industry.
This situation arises after the automotive industry failed to meet the government’s mandated export target of 2% of their imports for the fiscal year 2023. The renewal of the Manufacturing Certificate is contingent on achieving this target. Without a valid Manufacturing Certificate, customs clearance through Web Based One Customs (WeBOC) cannot be obtained, and finished goods, such as assembled vehicles, cannot be sold.
PAMA emphasized that the industry couldn’t meet the export target primarily due to reasons beyond its control. The letter outlined the challenges faced by the industry, including the post-Covid revival phase in 2021, imposition of import restrictions by the State Bank of Pakistan (SBP), production disruptions, losses, and various macroeconomic factors like inflation and exchange rate issues that made exports unattainable.
PAMA further stated that all necessary data and information regarding imports and exports had been duly submitted by its members, making it impossible to provide any additional information.
The auto sector in Pakistan heavily relies on imports and has been significantly impacted by the government’s measures to curtail imports and restrict Letter of Credits (LCs) issuance due to a severe dollar shortage. Additionally, increased finance costs and soaring car prices have diminished consumer demand. Major industry players like Indus Motor Company have had to announce production closures due to these challenges.
The escalating car prices, expensive auto financing, and reduced purchasing power of consumers are identified as the primary factors contributing to the decline in year-on-year (YoY) car sales, as reported by brokerage house Topline Securities. Despite a 49% increase in car sales on a month-on-month basis in August 2023, the numbers remain far below the usual levels seen in the industry. The automotive sector in Pakistan is at a critical juncture, and immediate government intervention is sought to prevent a complete shutdown of the industry and ensure its sustainable growth and operations in the coming fiscal year.
