KARACHI: Auto parts exports have shown a lethargic growth in the last seven years despite holding a regular prestigious auto show in Pakistan and active participation of local vendors in global auto exhibitions.
Exports stood at $16 million in FY18 and after some ups and downs, they reached $27m in FY22 but fell to $22m in FY23. During July-October FY24, exports dipped to $7.1m from $8m in the same period last year, according to the Pakistan Bureau of Statistics (PBS) data.
The export of auto parts also depends on the world market scenario relating to demand and supply situation, exchange rate parity and the country’s economic conditions.
Mashood Ali Khan, auto parts manufacturer/exporter, said vendors have kept themselves in their comfort zone by continuously making parts for local manufacturers instead of diversifying towards auto parts exports.
In the times of frequent plant shutdowns by the local assemblers from July 2022 onwards, only those vendors are a bit relaxed who have been persistently exporting parts to various countries besides exploring new markets.
He said vendors participate in major auto shows held across the world to display their capability of producing different types of parts to lure foreign buyers. By holding auto parts shows in Pakistan, foreign suppliers arrive to sell their products.
However, the trend of visiting auto exhibitions and fairs should produce some positive results like signing of technical or joint venture agreements between the foreign and local auto parts makers.
Exports play a vital role in modern economies, opening up new markets for goods and fostering economic growth through international trade.
Governments worldwide actively engage in diplomacy and foreign policy to promote and facilitate trade, encouraging exports and imports for the benefit of all parties involved, he said.
In Pakistan, the auto industry stands poised to make its mark on the international stage. A substantial portion of auto parts or approximately 44pc is theoretically addressable for global markets. These include high-tech aggregates and proprietary components like cylinder blocks and motors. The remaining 56pc consists of diverse parts, ranging from skill-intensive to labour-intensive components, steel/casting/iron rubber-intensive parts, and a blend of plastic and metal aggregates.
Mr Mashood said the potential for Pakistan to enter the global auto industry market is substantial. Globally, the aftermarket size stands at an impressive $480 billion. The government must play a pivotal role by giving a well-defined roadmap for at least the next five years. Under this framework, each assembler should export at least one model within five years besides a strategic plan to maximize localization, based on technological collaboration.
The Trade Development Authority of Pakistan (TDAP), in collaboration with commercial attachés, should organise webinars with trade associations and buying houses to create a conducive environment for exports. Additionally, the development of an export portal is crucial for streamlining export-related processes. The Engineering Development Board (EDB) should facilitate Joint Ventures and Technical Collaborations with international companies, with government financial support, ensuring no taxes on royalty and Technical Assistance Agreement (TAA) fees, he opined.
A key aspect of enhancing export potential is the development of local raw material manufacturing. Plastic, sheet metal, and other essential components should be produced domestically. Furthermore, the government should invest in public-private partnerships to establish testing facilities, development labs, and design houses. The Small and Medium Enterprises Development Authority (Smeda) should offer extensive training to improve productivity, build capacity, and modernise management.
Smeda can also develop Supply Chain Management Software to SMEs and initiate export coaching programmes.
Published in Dawn, December 3rd, 2023