- OEMs' licence expired at the end of September, and has not yet been renewed due to companies missing the 2% export target in FY23
Pakistan’s auto sector and the government appear close to resolving the issue of the manufacturer’s certificates that expired at the end of September, and were not renewed at the time since the companies failed to meet the agreed export target during fiscal year 2022-23.
Renewal of the certificate was contingent on the auto sector meeting the export target that was mutually decided between the two parties. Under the arrangement, the auto industry had agreed to export 2% in value of what they imported during fiscal year 2023.
An earlier meeting in September between auto industry representatives and Ministry of Industries and Production Islamabad “was put away inconclusively and the decision to be taken was sadly deferred”, according to Pakistan Automotive Manufacturers Association (PAMA) at the time.
However, talks are now ongoing over ‘relaxing’ the target, sources privy to the development told Business Recorder on Wednesday.
“The issue will be resolved,” a source, on condition of anonymity, told Business Recorder.
Non-renewal of licences means auto sector companies are unable to clear import consignments since the quota is part of their manufacturing certificate.
“Economic conditions are not conducive for the sector to export,” Sohail Bashir Rana, PAMA Chairman, told Business Recorder.
“There are severe import restrictions and you need imported components to make something before it can be exported.”
He added that there are agreements of companies with their principals, the parent Japanese or Chinese companies, that also hinder exports.
His statement refers to parent multinational companies’ global strategies, which take into account different markets and their dynamics before deciding on where to export from.
An auto sector expert said Pakistan imports auto-grade steel, aluminum and other raw material to make its vehicles. In an environment where the rupee sees massive depreciation, the incentive to export after importing expensive parts is little to none, he added.