Following the recent increase in the demand for vehicles, both the import of auto parts and the prices of cars are on the rise.
Prime Minister Imran Khan took notice of the matter and ordered the Ministry of Industries and Production (MoIP) in the last week of 2020 to investigate the reason for the inability of the existing automakers to increase their production capacities to match the rising demand for vehicles.
The car companies in Pakistan have attributed the surge in the prices of their vehicles to the increase in the price of the dollar against the Pakistani rupee. However, since the business activity in the region restarted, the rupee has retained its value against the dollar by a fair degree, but the prices have continued to soar regardless.
The federal cabinet has directed the MoIP to examine why the automakers have failed to localize the auto parts. The localization of auto parts can ensure efficiency both in terms of costs and production time.
The cabinet reportedly pointed out that the big three companies of the Pakistani auto industry that have been operational for about four decades have been unable to get the spare parts of vehicles manufactured locally, which has led to the increase in prices and a stretched lead time for the delivery of the vehicles.
This issue has also fuelled the ‘own money’ culture in the market which requires buyers to pay the dealers a premium on the car’s original Manufacturer Suggested Retail Price (MSRP) if they want early deliveries.
About three weeks ago, the Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) commended Prime Minister Imran Khan’s stern stance against the high prices of automobiles in Pakistan and acknowledged that the non-localization of auto parts in the country had contributed greatly to the extravagant prices of vehicles.
In light of this development, a representative of PAAPAM stated:
“It’s time to deeply analyze the root cause of the high prices of cars in the country and devise a long-term strategy to duly produce vehicles in line with the demand, besides devising and implementing a 10-year ‘Auto Parts Localization Policy’ (APLP) to ensure the localization of all value-added parts”.