Local vendor base real engine of growth in auto sector: IMC CEO

LAHORE  -   Chief Executive Officer of Indus Motor Company (IMC) Ali Asghar Jamali has said that it is in the interest of the car manufacturers to have maximum parts made locally and for last 30 years OEMs have come a long way to establish vendor and engineering base in Pakistan.

Talking to a selected group of journalists here at a local hotel on Monday, he said that full potential of job creation can only happen if these engineering companies supplying parts to OEMs are encouraged and supported as it has proven to be the real engine of growth in auto sector. In developed countries with strong vendor base, one job created at OEMs results in multiplier effect of 10 more jobs across value chain. He added that in developed economies, around 13.3 million Europeans, or 6.1% of the EU employed population, work in the automotive sector. The turnover generated by the automotive sector represents 6.8% of EU’s GDP. In Germany alone, every seventh job is "directly or indirectly" linked to the sector and contribute around 14% of German GDP. Pakistan has huge potential too. Once tapped, auto sector will be the launchpad for economic turnaround.

“With conducive environment the auto industry can provide high tech engineering base not only for auto industry but for all other engineering sectors,” he added.

“At one hand the industry contributes heavily to employment generation and local industry development but also saves the car makers from avoiding longer lead time for parts arrangement and hassle of cumbersome procedures of import and maintaining high inventories while facing the full brunt of rupee devaluation,” said Jamali.

CEO IMC added that the impact of devaluation on localized parts is less than the imported parts thus the price of locally made parts is comparatively lower than imported parts besides a hassle free supply chain.

“It is because of this advantage that car manufacturers have actively encouraged their vendors to develop maximum local parts for different variants,” said Jamali.

He said the government should give incentives to vendors in order to prepare them for facilitating the new entrants, as well support them by protecting their investments, employment and process by adding all locally made parts in SRO 693.

He said that IMC welcome competition which will not only benefit consumer and government but will help eventually in building a further strong vendor base. If govt ensures inclusive growth of vendors, encourage them with incentives for localization to compete with new entrant CKD rates, the local vendor base will broaden and their services will be extended to new entrant, which unfortunately is not the focus of current Auto Policy.

“Government should also ensure that new entrants are persuaded to adopt localization as soon as possible as compared to imports at concessionary rates. Only through localization, vendor industry and economy will make the most of policies,” he reasoned.

Now, added Jamali, the vendors have acquired state of art engineering technologies to produce precision parts and the auto components made by Pakistani vendors comply with best international standards.

Meanwhile, he pointed out that restriction of sale to non-filers has hurt the industry in a great deal. Just when auto policy was bearing fruits, said decision has halted the growth.

As per available data, the demand of vehicles is continuously declining for last couple of months. The production of 1300cc came down by 13% in November and around 43% in December as compared to October last year.

Similarly, the production of 1000cc was declined by 35% in December last year as compared to October 2018.

He appreciated the recent decision taken by government on used cars. He said that it will not only encourage new investments and entrants but will also help government to have check on grey economy which have resulted in issues like FATF.

“Auto sector can help government achieve its targets for economic growth if provided with transparent and consistent policies. It needs to deepen localization base through incentives and protect local manufacturing to secure foreign exchange and employment generation,” he concluded.



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