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Auto parts exports: Numbers encouraging, but not up to the mark
By Farhan Zaheer
Published: February 5, 2013
KARACHI:
Exports of auto parts indicate that shipments are gradually climbing and the products are going to 40 countries. Though the numbers are encouraging, the question is whether they are up to the potential.
Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Chairman Munir Bana does not think so. In an interview with The Express Tribune, Bana said, Pakistan needs consistent policies to see a consistent growth in the auto industry. Whichever government comes next, it should focus on developing the auto industry.
Only 15 of the 300 members of Paapam are exporting auto parts presently. Total exports of auto parts from Pakistan in fiscal year 2011-12 were $128 million, up from $115 million in 2010-11 and $90 million in 2009-10.
The auto industry was called the mother of all industries and governments support was essential for promoting employment and industrial growth. The industry was not only fully documented, but was among top five taxpaying sectors of the country, Bana said.
Atif Zafar, an analyst at JS Global Capital, said though the auto industry was highly protected, it deserved government cushion because of low volumes and small economies of scale.
With small economies of scale and inconsistent auto policies, big investment will not be forthcoming, said Zafar.
The auto parts industry, notching annual local sales of Rs140 billion, is much more dependent on domestic car assemblers the original equipment manufacturers (OEMs).
Bana said most of the Paapam members were enjoying good market shares with OEMs as well as in the local market and, therefore, they did not have time to think about exports. In the export market, competition is stiff and it is not easy for anyone to jump in due to various challenges. Pakistans auto industry mostly exports plastics, casting and forging parts to Europe, the United States and Africa.
Blaming mainly the government for the low export volume, the Paapam chairman said auto parts makers the world over usually enjoyed governments support in shape of subsidies and assistance in international exhibitions.
Citing examples, he said China and India were big exporters as their auto parts producers got hefty incentives from their governments.
Speaking of the major challenges in the export market, Bana said lack of support from the Trade Development Authority of Pakistan (TDAP) in terms of funding for international exhibitions and sending delegations to potential countries was a big hurdle in the way of promoting exports.
High cost of credit and cost of doing business was a big disadvantage in competing with China, India and Bangladesh, he said.
Besides car assemblers, Paapam has also been expressing reservations about trade liberalisation with India.
When asked why Pakistan cannot export auto parts to India when it is already exporting to Europe and the US, he said India has built a strong system of non-tariff barriers (NTBs), both visible and invisible, which is a major stumbling block.
No doubt, India offers a large market to us, but it is inaccessible because of the NTBs. On the other hand, our own government has to build its capacity in terms of ensuring that both our exports and imports are subjected to stringent quality tests, so that we can succeed in exporting to India and have our own system through which we can avoid dumping from India.
Bana also said Paapam was ready for technical collaboration and joint ventures with Indian auto companies, but the industry believed that the Indian automakers were more interested in using Pakistani market as a transit route for Central Asia.
He said the industry would welcome any player as far as it purchased car parts from Paapam members. We are ready to partner with any company from India, Korea or any other country if it procures local parts from our members.
A liberal car import policy in the last five or six years had damaged the business of auto part makers, he said and suggested that the government should develop the local industry because it generates employment opportunities.
Published in The Express Tribune, February 6th, 2013.
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Auto parts exports: Numbers encouraging, but not up to the mark – The Express Tribune
By Farhan Zaheer
Published: February 5, 2013
KARACHI:
Exports of auto parts indicate that shipments are gradually climbing and the products are going to 40 countries. Though the numbers are encouraging, the question is whether they are up to the potential.
Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Chairman Munir Bana does not think so. In an interview with The Express Tribune, Bana said, Pakistan needs consistent policies to see a consistent growth in the auto industry. Whichever government comes next, it should focus on developing the auto industry.
Only 15 of the 300 members of Paapam are exporting auto parts presently. Total exports of auto parts from Pakistan in fiscal year 2011-12 were $128 million, up from $115 million in 2010-11 and $90 million in 2009-10.
The auto industry was called the mother of all industries and governments support was essential for promoting employment and industrial growth. The industry was not only fully documented, but was among top five taxpaying sectors of the country, Bana said.
Atif Zafar, an analyst at JS Global Capital, said though the auto industry was highly protected, it deserved government cushion because of low volumes and small economies of scale.
With small economies of scale and inconsistent auto policies, big investment will not be forthcoming, said Zafar.
The auto parts industry, notching annual local sales of Rs140 billion, is much more dependent on domestic car assemblers the original equipment manufacturers (OEMs).
Bana said most of the Paapam members were enjoying good market shares with OEMs as well as in the local market and, therefore, they did not have time to think about exports. In the export market, competition is stiff and it is not easy for anyone to jump in due to various challenges. Pakistans auto industry mostly exports plastics, casting and forging parts to Europe, the United States and Africa.
Blaming mainly the government for the low export volume, the Paapam chairman said auto parts makers the world over usually enjoyed governments support in shape of subsidies and assistance in international exhibitions.
Citing examples, he said China and India were big exporters as their auto parts producers got hefty incentives from their governments.
Speaking of the major challenges in the export market, Bana said lack of support from the Trade Development Authority of Pakistan (TDAP) in terms of funding for international exhibitions and sending delegations to potential countries was a big hurdle in the way of promoting exports.
High cost of credit and cost of doing business was a big disadvantage in competing with China, India and Bangladesh, he said.
Besides car assemblers, Paapam has also been expressing reservations about trade liberalisation with India.
When asked why Pakistan cannot export auto parts to India when it is already exporting to Europe and the US, he said India has built a strong system of non-tariff barriers (NTBs), both visible and invisible, which is a major stumbling block.
No doubt, India offers a large market to us, but it is inaccessible because of the NTBs. On the other hand, our own government has to build its capacity in terms of ensuring that both our exports and imports are subjected to stringent quality tests, so that we can succeed in exporting to India and have our own system through which we can avoid dumping from India.
Bana also said Paapam was ready for technical collaboration and joint ventures with Indian auto companies, but the industry believed that the Indian automakers were more interested in using Pakistani market as a transit route for Central Asia.
He said the industry would welcome any player as far as it purchased car parts from Paapam members. We are ready to partner with any company from India, Korea or any other country if it procures local parts from our members.
A liberal car import policy in the last five or six years had damaged the business of auto part makers, he said and suggested that the government should develop the local industry because it generates employment opportunities.
Published in The Express Tribune, February 6th, 2013.
Like Business on Facebook to stay informed and join in the conversation.
Auto parts exports: Numbers encouraging, but not up to the mark – The Express Tribune
