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FAQ

Q1: What is PAAPAM and when was it formed?
A1: Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) was formed in 1988 to represent Automotive Parts Manufacturers (APMs) and to provide avenues for training, technical and management support to its members. After two decades, PAAPAM has attained a level of maturity as an association and provides an extremely effective link between the policy-making echelons in the Government and its member firms.
The Association has achieved recognition from the Government of Pakistan and today it is represented in important Government and semi-government institutions, like AIDC, AT&TC etc. PAAPAM is a member of the Federation of Pakistan Chamber of Commerce & Industry (FPCCI).

Q2: What are the fundamental aims and objectives of PAAPAM?
A2: The fundamental aims of PAAPAM are listed blow:
To encourage, promote, stimulate and protect the business interests of Pakistan ‘s Automotive Parts Manufacturers.
To create spirit of cooperation, goodwill and unity amongst the members of PAAPAM.
To represent the Association’s point of view to the Local, Provincial, Central and other Government authorities.
To eradicate all sorts of malpractices wherever these are found and to promote honest and fair dealings amongst the members of PAAPAM and the automotive industry in Pakistan as a whole.
To cooperate with Government Organizations, and other Associations and Chambers of Commerce & Industry of Pakistan in the mutual interest of industry.
To assist the members in resolving their differences and disputes and offer arbitration for settlement of disputes amongst parties.
To represent the members and promote the interests of automotive parts manufacturers in Pakistan .

Q3: What services does PAAPAM provide for its members?
A3: The Association offers various services to its members in the shape of:
Providing a common platform for representation of various issues with the Government.
Interaction with the Assemblers to resolve common problems faced by members.
Publication of quarterly newsletters and annual Members Directory.

Management of the www.paapam.com website domain.
Management of international exhibitions for exports.
Management and execution of Pakistan Auto Parts Shows (PAPS).
Organizing Training seminars to develop the industry.

Q4: What are the objectives of PAAPAM?
A4: PAAPAM’s objectives are to Create an awareness that the auto parts manufacturing industry is an intricate part of the Automobile Industry (which is the mother of all industries) and achieve the following:-
Industrial growth, generation of employment and attainment of high degree of value addition in the country.
Auto parts industry in Pakistan should serve as a reference to attract all major players for foreign and local investment in mega projects and clusters.

Facilitate technology transfer with a view to encourage Research and Development.
Obtain foreign and local support for skill development and training, continuous improvement in processes and technology up gradation in the industry.
Promote institutions that encourage value addition within the country and reward it through adequate incentives.
Arrange government support for providing adequate infrastructure and incentives for investment in the APMs sector.

Q5: Why is there “ON” money on cars?
A5: The forces of demand and supply determine the level of ON money in the market. Due to a surplus demand on certain models of car the dealers charge a premium on faster delivery of the vehicle. As production capacity increases, and supply and demand reach an equilibrium, this practice gradually fade away.

Q6: Are the cars produced in Pakistan inferior to cars produced in other parts of the world?
A6:All local parts are approved by the Original Equipment Manufacturers’ (OEMs) foreign principals and local cars are built on international standards of quality. However, poor road conditions in Pakistan play a major role in early defects and short operational life of cars.
Exceptional problems, however, arise in other parts of the world as well – where product recalls cost millions of dollars every year.

Q7: How many vendors are there in Pakistan and what parts do they manufacture?
A7: There are approximately 1,600 vendors in Pakistan , out of whom 400 are Tier I vendors working directly for OEMs. Categories include stamping parts, die casting/machining, rubber, plastics, electronic, seats, and more. Range of parts can be seen at (URL).

Q8: What is the current level of localization in Pakistan in various categories and why do the levels differ on similar products manufactured by different vehicle manufacturers?
A8: While smaller vehicles have a high level of localization (70%), larger vehicles could be as low as 30%. This is because of technology differences, frequent model changes, lead time differences for transfer of technologies, etc. In case of motorcycles and tractors, the industry has achieved deletion levels of up to 85%.

Q9: Are the auto-parts produced in Pakistan inferior to auto-parts produced in other parts of the world?
A9: No. However, the major reason for lack of export is that OEMs’ principals are not interested in giving up their country’s market shares to developing countries.

Q10: Why are cars more expensive in Pakistan compared to India ?
A10: Based on current exchange rates (Indian rupee being costlier there is almost 40% value difference between the two currencies, which usually creates this misconception), Pakistan prices are generally lower. Our Association has done an indepth study on this subject and this is available for discussion.

Q11: Why does PAAPAM complain about import of used cars when the current car manufacturers are not able to meet local demand?
A11: Used cars are generally junk – with no aftersales service or parts availability. It also discourages expansion plans of local OEMs and APMs, which in turn deprives the country of employment, industrialisation and technology transfer.
Both OEMs & APMs have invested heavily and are further investing towards capacity expansions to meet the local demand. Capacity expansion requires reasonable lead time and must be encouraged by banning import of used cars.

Q12: What is the current status of exports and what is your future program?
Exports of cars are not allowed to countries already serviced by OEMs’ principals. Similarly, OEM parts cannot be exported or sold in aftermarket. OEM’s should be forced to sign buy back agreements for export; the fact remains that such export volume requirements would be high, for which local APMs will need mega projects/heavy investments. At present, 90% of world parts market is controlled directly or indirectly by OEMs’ subsidiaries.

Q13: What further assistance does PAAPAM require from GOP to enable its members to become global suppliers?
A13: World class infrastructure, utilities, consistent & investment promoting government policies, law & order, low interest rates, non-interference through elimination of bureaucratic inspections in day-to-day running of business, changes in labour laws (eg. allowing employers to fire unwilling workers), etc are the minimum requirements.

Q14: Why is PAAPAM against entry of European car manufacturers in the market?
A14: In principle, PAAPAM is not against entry of any European car manufacturers as long as they come at existing industry level of deletion. However, PAAPAM feels that, at this point of time, proliferation is not justified because our current low volumes do not justify further investments by APMs in fixed costs like dies, moulds, facilities, etc.

Q15: Is there a monopoly of Japanese vehicle manufacturers in Pakistan , which allows them to supply bad quality vehicles at exuberant prices?
A15: There is no longer any monopoly. Korean & Chinese manufacturers have also entered the market and there is free competition. Quality and prices already discussed earlier.

Q16: Why does PAAPAM insist on maintaining tariffs on the import of auto-parts at 50% whereas the tariff on all other imports has been decreased to a maximum of 25%?
A16: WTO allows protection through reasonable tariffs. The auto industry in Pakistan has never been allowed to stand on its own feet because of nationalization, yellow cab schemes and other inconsistent Government policies.

Q17: When will Pakistan ‘s auto-parts industry be able to stand on its own feet and not require high tariff protection?
A17: Consistent government policies, infrastructure facilities, lower interest rates, law & order, etc can greatly help in making a small beginning in this area. Only then will the APMs be motivated to invest in both facilities and technology to bring the industry to an international level.

Q18: What is PAAPAM view on opening auto-parts trade with India and why?
A18: India’s reduced cost per unit (due to high volumes and lower cost of doing business) and export incentives would kill Pakistan’s auto parts industry. PAAPAM is totally against invasion of Pakistan market by Indian APMs.

Q19: When will Pakistan be able to manufacture a 100% Pakistan car?
A19: No country in the world makes its own 100% car. Pakistan should continue to aim towards maximum localization through encouragement of growth and technology transfer in Auto industry by maintaining consistent policies.

Q20: Why are engine & transmission parts not manufactured in Pakistan and when will they be manufactured in Pakistan?
A20: Both lack of technology and low volumes do not justify heavy investments required for these parts. However, Government has included in its Auto Industry Development Plan (AIDP) as one of its targets the manufacture of engine and transmission parts in the year 2010.

Q21: How has WTO (TRIMs) affected automobile industry in Pakistan and what will be the long term effects?
A21: TRIMs has forced the Government to introduce a long term policy, called Auto Industry Development Program (AIDP). Unfortunately, the policy has been partially implemented to the extent of Tariff Based System (TBS) only. The remaining components of the policy have not yet been implemented i.e:

-Productive Assets Investment Incentive.
-Technology Acquisition Fund
-Research & Development Incentive
-Human Resource Development Fund
-AIDC (Auto Industry Development Council) – still not fully functional.
-Institutional Mechanism to review progress under the policy.
-Yearly targets for shifting of auto parts from 35% duty to 50% duty.
In the longer term, only full and proper implementation of AIDP can ensure consistent policies, which will encourage OEMs & APMs to invest towards expansion, exports and modernization of their facilities.

Q22: What are non-tariff barriers (NTBs) and why does PAAPAM insist on using NTBs to protect the APMs industry?
A22: Non-tariff barriers are rules and regulations, which govern the quality, testing, standards, parameters, etc of products allowed into the country. These measures prohibit dumping and disallow sub-standard products from entering the country.
PAAPAM believes NTBs can go a long way in supporting and protecting the local industry, which is the need of the hour, if the Government wants to achieve the objectives laid down in AIDP.

Q1: What is PAAPAM and when was it formed?
A1: Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) was formed in 1988 to represent Automotive Parts Manufacturers (APMs) and to provide avenues for training, technical and management support to its members. After two decades, PAAPAM has attained a level of maturity as an association and provides an extremely effective link between the policy-making echelons in the Government and its member firms.
The Association has achieved recognition from the Government of Pakistan and today it is represented in important Government and semi-government institutions, like AIDC, AT&TC etc. PAAPAM is a member of the Federation of Pakistan Chamber of Commerce & Industry (FPCCI).

Q2: What are the fundamental aims and objectives of PAAPAM?
A2: The fundamental aims of PAAPAM are listed blow:
To encourage, promote, stimulate and protect the business interests of Pakistan ‘s Automotive Parts Manufacturers.
To create spirit of cooperation, goodwill and unity amongst the members of PAAPAM.
To represent the Association’s point of view to the Local, Provincial, Central and other Government authorities.
To eradicate all sorts of malpractices wherever these are found and to promote honest and fair dealings amongst the members of PAAPAM and the automotive industry in Pakistan as a whole.
To cooperate with Government Organizations, and other Associations and Chambers of Commerce & Industry of Pakistan in the mutual interest of industry.
To assist the members in resolving their differences and disputes and offer arbitration for settlement of disputes amongst parties.
To represent the members and promote the interests of automotive parts manufacturers in Pakistan .

Q3: What services does PAAPAM provide for its members?
A3: The Association offers various services to its members in the shape of:
Providing a common platform for representation of various issues with the Government.
Interaction with the Assemblers to resolve common problems faced by members.
Publication of quarterly newsletters and annual Members Directory.

Management of the www.paapam.com website domain.
Management of international exhibitions for exports.
Management and execution of Pakistan Auto Parts Shows (PAPS).
Organizing Training seminars to develop the industry.

Q4: What are the objectives of PAAPAM?
A4: PAAPAM’s objectives are to Create an awareness that the auto parts manufacturing industry is an intricate part of the Automobile Industry (which is the mother of all industries) and achieve the following:-
Industrial growth, generation of employment and attainment of high degree of value addition in the country.
Auto parts industry in Pakistan should serve as a reference to attract all major players for foreign and local investment in mega projects and clusters.

Facilitate technology transfer with a view to encourage Research and Development.
Obtain foreign and local support for skill development and training, continuous improvement in processes and technology up gradation in the industry.
Promote institutions that encourage value addition within the country and reward it through adequate incentives.
Arrange government support for providing adequate infrastructure and incentives for investment in the APMs sector.

Q5: Why is there “ON” money on cars?
A5: The forces of demand and supply determine the level of ON money in the market. Due to a surplus demand on certain models of car the dealers charge a premium on faster delivery of the vehicle. As production capacity increases, and supply and demand reach an equilibrium, this practice gradually fade away.

Q6: Are the cars produced in Pakistan inferior to cars produced in other parts of the world?
A6:All local parts are approved by the Original Equipment Manufacturers’ (OEMs) foreign principals and local cars are built on international standards of quality. However, poor road conditions in Pakistan play a major role in early defects and short operational life of cars.
Exceptional problems, however, arise in other parts of the world as well – where product recalls cost millions of dollars every year.

Q7: How many vendors are there in Pakistan and what parts do they manufacture?
A7: There are approximately 1,600 vendors in Pakistan , out of whom 400 are Tier I vendors working directly for OEMs. Categories include stamping parts, die casting/machining, rubber, plastics, electronic, seats, and more. Range of parts can be seen at (URL).

Q8: What is the current level of localization in Pakistan in various categories and why do the levels differ on similar products manufactured by different vehicle manufacturers?
A8: While smaller vehicles have a high level of localization (70%), larger vehicles could be as low as 30%. This is because of technology differences, frequent model changes, lead time differences for transfer of technologies, etc. In case of motorcycles and tractors, the industry has achieved deletion levels of up to 85%.

Q9: Are the auto-parts produced in Pakistan inferior to auto-parts produced in other parts of the world?
A9: No. However, the major reason for lack of export is that OEMs’ principals are not interested in giving up their country’s market shares to developing countries.

Q10: Why are cars more expensive in Pakistan compared to India ?
A10: Based on current exchange rates (Indian rupee being costlier there is almost 40% value difference between the two currencies, which usually creates this misconception), Pakistan prices are generally lower. Our Association has done an indepth study on this subject and this is available for discussion.

Q11: Why does PAAPAM complain about import of used cars when the current car manufacturers are not able to meet local demand?
A11: Used cars are generally junk – with no aftersales service or parts availability. It also discourages expansion plans of local OEMs and APMs, which in turn deprives the country of employment, industrialisation and technology transfer.
Both OEMs & APMs have invested heavily and are further investing towards capacity expansions to meet the local demand. Capacity expansion requires reasonable lead time and must be encouraged by banning import of used cars.

Q12: What is the current status of exports and what is your future program?
Exports of cars are not allowed to countries already serviced by OEMs’ principals. Similarly, OEM parts cannot be exported or sold in aftermarket. OEM’s should be forced to sign buy back agreements for export; the fact remains that such export volume requirements would be high, for which local APMs will need mega projects/heavy investments. At present, 90% of world parts market is controlled directly or indirectly by OEMs’ subsidiaries.

Q13: What further assistance does PAAPAM require from GOP to enable its members to become global suppliers?
A13: World class infrastructure, utilities, consistent & investment promoting government policies, law & order, low interest rates, non-interference through elimination of bureaucratic inspections in day-to-day running of business, changes in labour laws (eg. allowing employers to fire unwilling workers), etc are the minimum requirements.

Q14: Why is PAAPAM against entry of European car manufacturers in the market?
A14: In principle, PAAPAM is not against entry of any European car manufacturers as long as they come at existing industry level of deletion. However, PAAPAM feels that, at this point of time, proliferation is not justified because our current low volumes do not justify further investments by APMs in fixed costs like dies, moulds, facilities, etc.

Q15: Is there a monopoly of Japanese vehicle manufacturers in Pakistan , which allows them to supply bad quality vehicles at exuberant prices?
A15: There is no longer any monopoly. Korean & Chinese manufacturers have also entered the market and there is free competition. Quality and prices already discussed earlier.

Q16: Why does PAAPAM insist on maintaining tariffs on the import of auto-parts at 50% whereas the tariff on all other imports has been decreased to a maximum of 25%?
A16: WTO allows protection through reasonable tariffs. The auto industry in Pakistan has never been allowed to stand on its own feet because of nationalization, yellow cab schemes and other inconsistent Government policies.

Q17: When will Pakistan ‘s auto-parts industry be able to stand on its own feet and not require high tariff protection?
A17: Consistent government policies, infrastructure facilities, lower interest rates, law & order, etc can greatly help in making a small beginning in this area. Only then will the APMs be motivated to invest in both facilities and technology to bring the industry to an international level.

Q18: What is PAAPAM view on opening auto-parts trade with India and why?
A18: India’s reduced cost per unit (due to high volumes and lower cost of doing business) and export incentives would kill Pakistan’s auto parts industry. PAAPAM is totally against invasion of Pakistan market by Indian APMs.

Q19: When will Pakistan be able to manufacture a 100% Pakistan car?
A19: No country in the world makes its own 100% car. Pakistan should continue to aim towards maximum localization through encouragement of growth and technology transfer in Auto industry by maintaining consistent policies.

Q20: Why are engine & transmission parts not manufactured in Pakistan and when will they be manufactured in Pakistan?
A20: Both lack of technology and low volumes do not justify heavy investments required for these parts. However, Government has included in its Auto Industry Development Plan (AIDP) as one of its targets the manufacture of engine and transmission parts in the year 2010.

Q21: How has WTO (TRIMs) affected automobile industry in Pakistan and what will be the long term effects?
A21: TRIMs has forced the Government to introduce a long term policy, called Auto Industry Development Program (AIDP). Unfortunately, the policy has been partially implemented to the extent of Tariff Based System (TBS) only. The remaining components of the policy have not yet been implemented i.e:

-Productive Assets Investment Incentive.
-Technology Acquisition Fund
-Research & Development Incentive
-Human Resource Development Fund
-AIDC (Auto Industry Development Council) – still not fully functional.
-Institutional Mechanism to review progress under the policy.
-Yearly targets for shifting of auto parts from 35% duty to 50% duty.
In the longer term, only full and proper implementation of AIDP can ensure consistent policies, which will encourage OEMs & APMs to invest towards expansion, exports and modernization of their facilities.

Q22: What are non-tariff barriers (NTBs) and why does PAAPAM insist on using NTBs to protect the APMs industry?
A22: Non-tariff barriers are rules and regulations, which govern the quality, testing, standards, parameters, etc of products allowed into the country. These measures prohibit dumping and disallow sub-standard products from entering the country.
PAAPAM believes NTBs can go a long way in supporting and protecting the local industry, which is the need of the hour, if the Government wants to achieve the objectives laid down in AIDP.