KARACHI: The start of plant shutdowns by the local auto assemblers has forced the vendors to keep their production activities suspended.
For example, Bolan Castings Ltd (BCL) in a stock filing on Friday said that due to a drastic drop in orders from its customers, the company is facing a drop in sales. As a result, the management has decided to temporarily halt production activities from Aug 12-16.
Pak Suzuki Motor Company Ltd (PSMCL), which had already suspended production activities from Aug 1-13, has further extended non-production days (NPDs) from Aug 15-20.
The car assembler on Friday informed its vendors it would not accept supplies related to four-wheel production unless they got other critical parts. However, two-wheeler production will be carried out as planned. Spare parts warehouses will receive supplies for both four-wheelers and two-wheelers.
PSMCL said any production loss would be recovered from the Sept-Dec period and asked the vendors to build up their finished goods safety stocks.
Assemblers shut plants on low demand due to high prices
For the last 45 days, it has been facing delays in the approval of completely knocked-down kits stranded at ports.
Indus Motor Company (IMC), the assembler of Toyota vehicles, also paused production activities from August 6-8 due to a low level of inventories of raw materials and components, which was creating problems for vehicle assembly.
Auto part maker/exporter Mashood Ali Khan said the vendors, who rely on supplying parts to a single-source auto assembler, are now in hot water. They have no option but to close down their production of parts after the assemblers shut down the plant.
“This is a critical situation for such vendors as to how they will manage high power and gas bills, salary disbursements and overhead expenses in case of zero production of parts,” he said.
He urged the government to recognise the problems facing the auto assemblers and their vendors after the FY25 budget and hold a meeting with the stakeholders to resolve their issues.
Pakistan Automotive Parts and Accessories Manufacturers (Paapam) has informed the industry ministry that the auto parts vendors face hardships due to the strict implementation of WP29 UNR standards.
Many of the 17 parts and components selected for WP29 implementation have achieved full compliance by auto part vendors. However, the industry had to bear the heavy cost of certification by foreign laboratories since no testing facilities were available in the country. This has resulted in a cost increase, an impact on vendor cash flow and an outflow of foreign exchange from the country.
Some components and vehicle models have not been able to achieve WP29 certification due to various factors pertaining to the availability of technical assistance from Japanese vendors, their reluctance to make technical agreements with Pakistan and send their engineers, and country risk.
“We need more time to convince these Japanese vendors to assist us in achieving certification and compliance,” Paapam Chairman Abdul Rahman Aizaz informed the ministry, adding that due to the above situation, the Engineering Development Board is not approving the import quota of assemblers, due to which some assemblers have announced shutdown of production.
This will hurt vendors as loss of business in these challenging economic circumstances will lead to financial bankruptcy of many companies.
Published in Dawn, August 10th, 2024
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