Automobile manufacturers: devaluation of Pakistani rupee adds to woes

Although Pakistani rupee has been experiencing a downward trend against major currencies of the world, the devaluation of rupee in the last two years has raised the input cost substantially, adding to the woes of automobile manufacturers and economic instability in the country, according to auto industry sources.
Of the other sectors, local Original Equipment Manufacturers (OEMs), who contribute at least three percent to the national kitty, are feeling maximum heat of rupee devaluation. This is because of the developments beyond their control. Although OEMs have achieved up to 60 percent localisation, they have to import critical engine and transmission, along with other parts from Japan and the substantial decline of Pakistani rupee against Japanese Yen and US Dollar has thrown serious financial challenges for the local OEMs as they are barely absorbing the sky-rocketing input cost.
Sources said that the rate of US dollar has increased by 5.19% against the rupee from June 2009 till May 2011 while the rupee has depreciated 25.2% against Japanese Yen during the same period increasing the cost of imported parts used in locally made vehicles.
About the hike in prices of other input cost, they said that during the last two years the rates of natural gas have increased by 13%, electricity 34%, diesel 34% and petrol 20%. In the international market, during the same period, the rate of steel has increased by 27% from USD 586 to USD 746 per ton while the rate of polypropylene, aluminium, copper and lead have gone up by 67%, 35%, 24%, and 45% respectively.
Sources urged the government to control the rapidly depleting value of Pak rupees against major currencies otherwise industrial base in the country may not withstand the increasing input cost which could result into a severe blow to the industrial base of the country.