Auto Parts Manufacturers Are Afraid of Going Bankrupt

The industry's small units are going bankrupt as a result of the domino effect of currency depreciation, spiraling inflation, rising freight costs, increasing utility tariffs, mounting bank interest, skyrocketing material costs, and a working capital crunch, according to Pakistan's auto parts manufacturers, who claim they are in the midst of the worst crisis in history.

Speakers at a seminar held by the Pakistan Association of Automotive Parts and Accessories Manufacturers voiced these opinions (PAAPAM). Many association members, who unanimously agreed that it was the biggest crisis in the history of Pakistan's car industry, were present at the seminar.

The present economic situation was discussed, particularly the original equipment manufacturers' (OEMs') decision to freeze key cost components, which had become a hot topic for all the component producers. In light of growing input prices, the OEMs (local assemblers) were questioned by PAAPAM Chairman Abdur Razzaq Gauhar and Senior Vice Chairman Abdul Rehman Aizaz about why they were refusing to accept the vendors' requests for higher profit margins rather than freezing them.

Members of the association demanded that compensation be given for the rise in costs that could not be offset by the poor profit margins, which had been locked for many years. They all agreed that the OEMs needed urgent assistance and said that all PAAPAM members had provided them with high-quality parts at extremely fair costs.

Participants in the seminar warned the OEMs that their production lines would shut down entirely unless they provided adequate support for the auto parts makers at this crucial time to offset the effects of hyperinflation, rupee devaluation, increased freight, utility, interest, and material costs, and a lack of working capital.

As a result, the OEMs' assembly lines would stop operating, and in the worst case, the automakers might be forced to import car components at exorbitant rates due to high freight costs and customs. Members of PAAPAM also wanted a quick rise in their margins.

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