LAHORE, Jan 10: The Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) has called for bringing insurance mechanisms of auto loans into normal audit practices.

In its review of the auto sector during 2003, Paapam said the extremely high charge of insurance premiums on auto loans had been discouraging consumers and could retard any future demand increase.

Paapam chairman Syed Nabeel Hashmi termed 2003 as a good year for the auto industry and automotive parts manufacturers due to increased demand for cars, motorcycles, trucks, buses, and tractors.

He said the SBP's contained policy of downward revisions of interest rates and excess liquidity available with the banks had allowed auto parts manufacturers to undertake BMR. He was hopeful that the interest rates on auto loans would further come down.

However, he said it was not that everything was fine for the sector during the year. "The industry has long been calling for a solution to its pricing problems of its major raw materials, including steel and plastic. The high prices of raw materials have reduced the margins of the automotive parts manufacturers."

Mr Hashmi said the country's auto parts exports had been hovering around $25 million per annum for the last couple of years. There appeared no sign of increase in the near future as neither the government nor the Export Promotion Bureau seemed to understand the export potential of the sector.