Auto parts makers call on government to increase import quotas

LAHORE: Pakistan Automobile Manufacturers Association (PAMA) and Pakistan Automobile Parts and Accessories Manufacturers Association (PAAPAM) have jointly written a letter to the State Bank of Pakistan (SBP), the Federal Secretary of industries and production, and the Engineering Development Board (EDB) calling for an increase in the quota for imports of sub-components, components and sub-assemblies in the automotive sector.

PAMA and PAAPAM cite the difference in treatment between OEMs and parts manufacturers by the aforementioned state entities with respect to the allocation of import quotas.

According to the letter “The agreement reached between OEMs, SBP, MOF and EDB/MOIP for the allocation of currencies, SBP releases currencies at 50% of the 4-month average from July 2022. OEMs then began to receive funds and clear their CKD shipments from the port”.

“However, such understanding was not available to auto sellers and their shipments were stuck at the port, hampering vehicle production. A quota of $8.59 million is now allocated to suppliers from September instead of $8.59 million. July, resulting in a shortage of parts, the letter continues.

Subsequently, PAMA and PAAPAM asked that their quota be fixed from July and not from September like the equipment manufacturers. They cite that some of their members have been assigned quotas below 50% due to irregularities in data entry into the ITRS system, and have requested that these anomalies be rectified.

Additionally, they cite that the motorcycle, tractor, and truck/bus segments require very few imports of knocked down (CKD) goods. “about 20% of the car and SUV segment”. Thus, the letter requests that parts manufacturers operating in this segment be granted additional relief, “We therefore request an additional quota of only $2.00 million for this very essential segment of the automotive sector,” the letter states.

The letter also indicates that the aforementioned entities should be aware of how the automotive industry is about to launch new models. Therefore, “for smooth development of local parts, testing is carried out months before the start of mass production. We request the increase of the import quota of machinery and related equipment”.

Finally, in light of the above, the letter requests that the quota be set at $13 million. By doing so, parts manufacturers will be able to eliminate supply shortages and “after the backlog is cleared, imports will automatically be adjusted to 50% of the OEM production level.”

The quota this was a rationing mechanism devised as a result of the SBPs increase administrative control of CKD imports to balance the country’s dwindling foreign exchange reserves while keeping the automotive sector afloat.

The government deleted the outright ban on imported vehicles last month via an increase in import duties, and also hinted at the easing of import restrictions for tractor manufacturers in a bid to encourage localization. However, the government has refrained from making an official announcement on the situation of CKD in the automotive sector. Auto sales fell in July and August from last year’s figures.

However, the sector is likely to remain adrift in terms of quotas, at least until the rupee is able to halt its decline. downward spiralwhich was also the main reason the restrictions were imposed in the first place.

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