When the automotive parts industry is already under financial burden due to liquidity crunch amidst adverse policies, lack of export incentives, non-availability of credit and absence of utility services, the motorbike assemblers have started to delay payments to the auto parts vendors.
Pakistan Association of Automotive Parts & Accessories Manufacturers Chairman, Munir Bana and Vice Chairman Usman Malik stated this at the association's management committee meeting on Wednesday. The meeting was called to deliberate the burning issue of non-payments by the bike assemblers to PAAPAM members. On this occasion, convenor of the Two-Wheeler Standing Committee of PAAPAM, Iftikhar Ahmed, provided the meeting full details of defaulting local bike companies. Expressing serious concern, the convenor said that unpaid invoices of auto parts makers by the motorcycle assemblers of 70CC Chinese version are continued to escalate.
Addressing the meeting PAAPAM Chairman Munir Bana said that the Engineering Development Board of Pakistan issued these assemblers licenses of motorcycles manufacturer in Pakistan and auto parts companies generally consider EDB's certification as credible to supply components to them on credit.
He complained that the situation is now getting serious when motorcycle assemblers have started to either delay payments or straight away default, leaving parts manufacturers with no recourse. He raised the point that at a time when the vendors were already facing a number of challenges, including prolonged energy crisis, deteriorating law and order situation, high input cost and struggling for its survival, the assemblers are engaged in creating more hurdles for their parts providers.
The chairman said the parts industry is presently unable to meet its working capital requirement due to exceptional hike in rupee-dollar parity, which is ultimately increasing cost of doing business particularly in Punjab where number of industries is squeezing.
PAAPAM vice chairman Usman Malik complained of negative treatment and non serious attitude of a number of assemblers who have made it a practice to default on payments of one supplier and then shift to another one. "In fact, almost 90 percent of the funds are being used by the assemblers for their operations actually belong to the vendors who are now facing immense problems due to this dishonesty", he added.
Usman Malik claimed that a number of auto parts SME's have closed their business due to non-payment and their owners are running from pillar to post for recovery. "This situation will not serve the industry well. I am very much surprised why only our local companies indulge in such negative business practices. Our small parts manufacturers go to extreme efforts to arrange funds for their companies, as the banks do not lend to them easily. It is the hard earned money of these small entrepreneurs that is misused by the motorcycle manufacturers in their own running operations. This practice must stop immediately".
Different parts makers, addressing the meeting said that the OEMs gets parts from vendors, assemble their bikes, sell it in the market, enjoys the profit but do not consider paying their bills on time. They stated that this attitude of the Chinese Pakistani brand companies is very bad. Though one or two brands have made improvements in their payments yet many still continue to exploit the small parts makers. They, however, appreciated the Japanese motorcycle assemblers who have not only created a prompt payment regime but also being consistent in upgrading their parts suppliers.
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