PAAPAM asks OEMs to pass on due profit share to vending industry

by index360

LAHORE: The speakers at a seminar, organized by the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), have questioned the Original Equipment Manufacturers (OEMs) for not passing on due share to the vending industry.

While demanding justified price indexing amid frequently increasing inputs’ cost they asked the OEMs to pass on at least 10% of net profit to the vendors, besides reevaluating all frozen variables of cost.

The financial experts, in the seminar, explained that the frozen cost elements had lost the industries’ rationale long ago, as fixed costs have also become variable in the long run due to variations in materials’ cost, rising energy tariffs, jumping labor charges, highest ever interest rates, and regular rupee devaluation against dollar, they said.

The profitability in absolute terms had reduced to almost nil in percentage, observed the experts Musa Mehmood and Faisal Jalal in their presentation.

The participants were generally seen as agitated and rattled for not getting any positive compensation from the OEMs despite the frequent price increase of their vehicles for the end consumers.

The seminar was also addressed by Chairman PAAPAM Abdur Razzaq Gauhar and Senior Vice Chairman Abdul Rehman Aizaz, who portrayed the condescend gravity of the situation and the need for evolving the win-win policy for the OEMs and vendors.

Gauhar observed that the echo of recent economic crises resonates in all segments of society, from commoners to tycoons. The exceptional inflation has reduced the vendors’ contractual capacity, tweaking their profitability. The main industries look to acclimate its mutual arrangements with OEMs hampered by this ongoing crunch. Their major business partners of Pakistan vending industry are uncomfortable with the delayed and partial address of the hot issue by OEMs, he said.          

Ruminations of this unrest could be clearly seen in the big gathering of hundreds of charged automotive vendors in Lahore, suggesting the Original Equipment Manufacturers join their heads and extend their hands of cooperation to avoid devastating and crippling effects, he added.

The PAAPAM Chairman also stressed to the vendors to take every possible measure for internal cost control to come out of the prevailing impasse. Scorning the prevalent scenario simply means the threat of countrywide closure of the industry’s operations, he added. The Chairman detailed the efforts the PAAPAM had made since March 2020, but now the financial muscles of the vending community have exhausted to support the volatile business conditions.

The house adopted a unanimous resolution to ensure at least a 10% profit margin based on all cost elements from the OEMs, unfreezing the fixed cost headings, indexing variable after the increase of every 2% + inputs, and payment within 15 days, to save the auto parts vendors from collapse and ensure the smooth operations of the auto industry.

The Chairman further offered the fraternity to conduct further training sessions on internal costing and established a help desk in Karachi and Lahore to assist vendors in presenting their price increase cases with their respective OEMs.

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