Significant rise in plastic prices affects auto parts makers

KARACHI: Prices of plastic granule increased more than 50 percent during three months, jacking up cost of auto parts production and eroding margins of mainly small and medium vending companies, industry officials said.

Mashood Khan, former chairman of Pakistan Association of Automotive Parts and Accessories Manufacturers told The News that plastic granule is their major raw material, whose prices during last three months increased by more than 50 percent.

It comes with various rates, he said. A kilogram is available for Rs2,500, Rs3,000 to higher prices depending on its various categories. Due to an increase in the prices, the spare parts industry is suffering, as their orders are declining at higher rates and affordability becomes the issue.

Khan, who is a director of Mehran Commercial Enterprises said small and medium enterprises were going through the period of survival during the lockdown related to Covid-19, but the situation is not coming to normal for them as price of the major raw material is increasing.

“When lockdown was over, there were issues of shipping and logistics. The material was not available but we faced it. However, now prices of raw material are being increased by three to four times in a month,” he said. “From February 1 till mid of March, prices have increased thrice.”

Prices of imported and the locally produced raw materials are increasing. The small and medium enterprise sector mostly purchases the raw material from the local market and very few of them are imported. During the issues related to shipping line when ships were not arriving, raw material supply for plastic granule also got affected. Talking about the auto policy, Khan said the government had given licences to new 20 companies. Of which, around four big players have arrived. “Government objective was achieved successfully with their arrival, whereas, parts manufacturers have yet to get benefit from it.”

The new entrants are enjoying tax incentives and import the parts. “Local industry has to wait and show patience for some time,” he said. They will have to move towards the local industry for the localisation of parts once the tax incentive period is over. “Ultimately, you have to come towards localisation.”

He said Toyota’s Corolla has not lost the market share, as only 1.3 Corolla was closed and share of 1.8 remained intact in the market. Toyota Yaris replaced the 1.3 segment of Corolla and made its market. Both Corolla and Yaris’ volume showed that there was no decline in the sales. Despite of new arrival in the field, Yaris is using some local parts as well, he said while their benchmark is same as that of Corolla. According to industry sources, Corolla uses above 70 percent locally manufactured parts, second highest localisation after Suzuki’s Mehran, whose production was closed a couple of years ago.