Input cost escalates in auto industry

KARACHI - The Pakistani rupee has been experiencing downward trend against major currencies of the world, especially the devaluation of rupee in the last two years has raised the input cost substantially adding to the woes of manufacturers besides economic instability in the country. Auto industry sources said that the local Original Equipment Manufacturers (OEMs), who contribute at least 3 per cent in the national kitty, are feeling the maximum heat of rupee devaluation. Although the OEMs have achieved up to 60 per cent localisation, they have to import critical engine and transmission parts along with other parts from Japan and the substantial decline of Pak rupee against Japanese Yen and US Dollar has caused severe financial challenges for the local OEMs as they are barley absorbing the sky-rocketing input cost. Sharing the statistics, the sources said that the rate of US dollar has increased by 5.19 per cent against the rupee from June 2009 till May 2011 while the rupee has depreciated 25.2 per cent against Japanese Yen during the same period increasing the cost of imported parts used in locally made vehicles, they added. Commenting on hike in prices of other input cost, the source said that during last two years the rates of natural gas have increased by 13 per cent, electricity by 34 per cent, diesel by 34 per cent and petrol by 20 per cent. He said that in the international market during the same period the rate of steel has increased by 27 per cent from $586 to $746 per ton while the rates of polypropylene, aluminium, copper and lead have increased by 67, 35, 24 and 45 per cent respectively. They urged the government to control the rapidly depleting value of Pak rupee against major currencies otherwise the industrial base in the country will not withstand and increasing input cost could result into a severe blow to the industrial base of the country.