Business & Finance

Pakistan’s auto industry seeks ‘remission’ after failing to meet export target during FY23

  • Manufacturing Certificate of all OEMs is due to expire on Sept 30, and would have been renewed if export target had been met
Published September 28, 2023

The auto industry is seeking a remission from exports for fiscal year 2022-23 and has urged the government to resolve the issue over the Original Equipment Manufacturers’ (OEMs) certificate that would allow them to continue operations.

“We urge your kind immediate intervention to resolve the present impasse by granting remission from exports for the year 2022- 23 and redeeming the industry from a complete shutdown,” Pakistan Automotive Manufacturers Association (PAMA), a representative body for the auto sector, stated in a letter addressed to the Secretary, Ministry of Industries and Production Islamabad.

The letter, dated September 27 and of which a copy is available with Business Recorder, also referred to a meeting on September 25 with auto industry representatives “that was put away inconclusive and the decision to be taken was sadly deferred”.

“In its implication, after three more days, the crucial date September 30 shall arrive, beyond which the Manufacturing Certificate of all OEMs shall expire, the quotas to import materials shall not be uploaded, no further invoicing of even ready products possible, consequently, all industrial operations shall come to a halt thus shutting down the industry,” PAMA added.

The development comes after the auto industry missed a mandatory target set by the government to export 2% of what they imported during fiscal year 2023.

The renewal of the manufacturing certificate was contingent on the industry meeting the target.

Without a manufacturing certificate, consignments cannot be cleared through customs – Web Based One Customs (WeBOC) – while finished goods (assembled vehicles) also cannot be sold.

PAMA said the export target could not be met “primarily for reasons beyond the industry’s control”

“The industry has been repeatedly drawing attention of the authorities in the meetings and umpteen letters were written throughout the outgoing years,” stated the letter.

“The reason exports were not possible was something obvious – in the year 2021, the auto industry was in the post Covid revival phase.

“Then suddenly it was caught up by imposition of import restrictions by the State Bank of Pakistan (SBP). This followed closures and non-production days and the losses of the sorts.

“Production and sales plummeted that even local supplies could not be met. Other macroeconomic factors like inflation, exchange became oppressive. Exports became unattainable.”

PAMA said that data/information called for with regard to imports and exports has already been submitted by its members and “it would not be possible to add anything more to it”.

The country’s auto sector, hugely dependent on imports, has been hit hard by the government’s decision to curb imports and restrict issuance of LCs amid a severe dollar shortage. Additionally, higher finance cost and massive increase in car prices have also reduced demand from consumers.

On Wednesday, Indus Motor Company – one of the major players in the sector – made its eighth announcement of production closure this year.

“Escalating car prices, expensive auto financing, and low purchasing power of consumers are among the primary reasons for the decline in YoY sales,” brokerage house Topline Securities said in a report earlier.

Car sales in Pakistan witnessed an increase of 49% on a month-on-month (MoM) basis in August 2023, clocking in at 7,579 units, but the numbers are nowhere close to levels usually seen in the industry.

Comments

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Muhammad Sabir Shaikh Sep 28, 2023 09:45am
We Should select one or two designs of Electric Scooters for localisation in our country , and than Export to Afghanistan and other possible buyers countries, many designs import of CKD's in EV's of two Wheelers discourage localisation in Pakistan due to quantity reasons
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Obaid Surmawala Sep 28, 2023 09:46am
Liars. They booked hell of a profit and now shedding crocodile tears.
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Tariq Qurashi Sep 28, 2023 10:21am
The government has given the auto industry huge protection for many years under very high import duties with the hope that this would incentivize a local car manufacturing industry to develop. After many years there is a joke that the only thing Pakistani in a locally assembled car is the air in its tires! The industry has formed cartels to influence government policy, and is overcharging for substandard stripped down vehicles that do not meet international standards. The industry has no hope of ever exporting the overpriced rubbish they assemble here because no one would buy it. The government should "bite the bullet" and realize that their policies have failed to get the car manufacturers to localize in any meaningful way, and is likely to continue to fail. The government should reduce the import duty on all cars to 25%, regardless of engine size, and give these local cowboys some competition.
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Sunny Sep 28, 2023 11:47am
All Local Industries must be supported by the government and should be encouraged to Export as much as they can. Industries not only create Jobs but also other economic activities ... Automobile Industries are paying huge Taxes, they should also be supported through better Policies.
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Muhammad Anwar Khan Sep 28, 2023 12:14pm
This restriction r requirement on the exportation of automotive parts etc seems to be clear violation of the WTO Agreement on the Trade Related Investment Measures (TRIMS).
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Abdul Majeed Sheikh Sep 28, 2023 01:01pm
@Obaid Surmawala, Associated with auto industry for more than four decades I am sorry to note the general public more so the so called professionals like Surmawala Sahib unaware of contributions made by auto sector Tractors have 90% localization Mototcycles more than 95% Cars & LCV more than 65% the sector contributes around 20% in GDP, 38% in revenues and employs thousands directly and indirectly both in forwatd and backward industry linkages beside attracting FDI and bringing JV TA and new technologies
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test Sep 28, 2023 03:12pm
@Abdul Majeed Sheikh, We produce local engines ??? We produce local auto parts ??? We produce local cars ??? Engines are imported. Auto parts are imported. Cars itself are imported. Correction: Tractors have 90% local assembling rate. Bikes have 90% local assembling rate. Cars have 65% local assembling rate. What is assembling just search it on google. Assembling means to import ready made parts from other countries and just fit them together and this is called assembling. Regarding export read it https://propakistani.pk/2023/07/14/the-truth-is-toyota-indus-really-exporting-any-local-car-parts-to-egypt/ Read it carefully before talking any non sense.
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Az_Iz Sep 28, 2023 04:49pm
They couldn’t even meet a mere 2% target, granted there were restrictions to imports. In future, instead of not granting licenses at all, the government should charge a higher fee if export targets are not met.
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Saqib Sep 28, 2023 06:09pm
Huge foreign exchange reserves are being eaten up by the auto industry. Import of autos should be completely ban. Overseas Pakistani should be allowed to bring vehicles in Pakistan with condition that atleast for three years they wouldn't be allowed to sell it. Thus we will have no pressure on balance of trade.
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KU Sep 28, 2023 07:30pm
It's really simple, every small and large sector has a conglomerate and is just a link in the food chain that must feed everyone to exist, function without any fear of legal requirements, and make money to become rich. The dollar hoarding and any other hoarding of commodities is now considered as just another business, and we assume that this self-serving economics will survive.
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