Significant Rise in Plastic Prices Affects Auto Parts Makers

Prices of plastic granule increased more than 50 percent during three months, jacking up cost of auto parts production and eroding margins of mainly small and medium vending companies, industry officials said.

Talking to The News, Mashood Khan, Director Exports Mehran Commercial Enterprises (MCE) and former chairman of Pakistan Association of Automotive Parts and Accessories Manufacturers revealed that plastic granule is their major raw material, whose prices increased by more than 50 percent during last three months.

It comes with various rates, he said. Due to an increase in the prices, the spare parts industry is suffering, as their orders are declining at higher rates and affordability becomes the issue. Small and medium enterprises were going through the period of survival during the lockdown related to Covid-19, but the situation is not coming to normal for them as price of the major raw material is increasing.

“When lockdown was over, there were issues of shipping and logistics. The material was not available but we faced it. However, now prices of raw material are being increased by three to four times in a month,” he said. “From February 1 till mid of March, prices have increased thrice.”

Prices of imported and the locally produced raw materials are increasing. The small and medium enterprise sector mostly purchases the raw material from the local market and very few of them are imported. During the issues related to shipping line when ships were not arriving, raw material supply for plastic granule also got affected. Talking about the auto policy, Khan said the government had given licences to new 20 companies. Of which, around four big players have arrived. “Government objective was achieved successfully with their arrival, whereas, the local parts manufacturers yet to get benefit from it.”

“The new entrants are enjoying tax incentives while local industry has to wait and show patience for some time,” he said. They will have to move towards the local industry for the localisation of parts once the tax incentive period is over. “Ultimately, you have to come towards localisation”, he added.

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