Auto parts’ productionshrinks to less than 30pc

KARACHI: The 55 percent drop in auto OEM’s volumes during the financial year 2023 and the current sluggish demand amid rapid inflation and higher taxes have shrunk the production of auto parts manufacturers to less than 30 percent.

“We manufacture 459 dies and 155 parts for the auto industry and for that, we have invested billions of rupees from 2019 to 2023, but due to current issues in the industry our production has shrunk to less than 30 percent from 140 percent,” said Mohsin Siddiqui, General Manager Plant at Agriauto.

He informed that they invested Rs2.5 billion only for Toyota Cross, Pakistan’s first hybrid electric vehicle, but the auto industry’s current demand and supply issues are nullifying their overall investments.

It is worth adding here that all big OEMs were forced to shut their plants due to low demand as Indus Motor Company shut its plants for 58 days, Honda Car for 78 days, and Suzuki Motors for 89 days from October 2022 to August 2023.

Besides, said Mohsin, the imported used cars captured 25 percent market share in July this year, which in turn severely impacted the auto parts manufacturing sector. It is to be noted that during financial year 2023, Pak Suzuki grabbed the largest chunk of sales at 52 percent, IMC 25 percent, and Honda Car recorded a 13.5 percent share.

“This equation clearly shows that used car imports have become the second biggest seller in the local auto industry, equally crippling both the auto industry and auto parts manufacturers,” reasoned Mohsin.

Moreover, he added, despite achieving heavy localisation, the sluggish demand due to the low purchasing power of customers amid record high interest rates has been nullifying the growth patterns of local auto parts manufacturers.

“The auto market is likely to stay dull with an expected decline of sales by 8 to 10 percent during the financial year 2024,” said Mohsin, adding that this will have a bad impact on the vendors’ strategy of working towards ‘make in Pakistan’.

Synthetic Products Enterprises Limited (SPEL), another automotive parts manufacturer, showed similar concerns that the auto parts manufacturers are burdened at every level by the current economic turmoil.

“The current uncertainty in the local auto industry is creating unemployment and waste of the investments of millions in machinery and infrastructure,” said Mirza Sikander Baig, General Manager - Plant at SPEL.

He added that they have the biggest mould making workshop in Pakistan with the latest machines and automated production line, but they are not cost-effective under the current circumstances.

“We invested Rs700 million in our plant in Karachi in 2021 and imported robots for the production line, with the investment of Rs30 million to design 35 moulds for plastic interiors,” said Sikander. But, he added, the auto industry’s capacity went down from 60 percent in August 2022 to just 19 percent in June 2023 and this situation has created turmoil for auto parts manufacturers.

“The making of auto parts is a very complex process and it takes around two years from planning, designing to production in order to meet global standards,” said Sikander. He added that the auto parts manufacturers need stability to grow their business and for that, the government should extend its support to both the auto industry and auto parts manufacturers.