Local auto parts manufacturers have urged the government to adopt Thailand and Vietnam-style policies to help the sector grow and realise its export potential.
“We face several challenges that hinder our growth. These include raw material dependency, cost penalties, low domestic volumes, high utility costs, security issues, perception barriers, lack of export incentives, poor infrastructure, and the flattening of cascading tariffs,” said Shehryar Qadir, Senior Vice Chairman of PAAPAM.
He said Thailand and Vietnam became global auto export hubs through specific strategies. These included early protection for domestic industries, attracting structured foreign investment via joint ventures, industrial parks, and technology transfer, and offering export-linked incentives like rebates and production-linked rewards.
Qadir said inconsistent government policies have kept the local parts industry from reaching global competitiveness. He recalled that the IDP 2007-12 had forecast production of 500,000 units by 2012. But mid-policy changes in duty structures, cancellation of technology funds, and shelving of cluster development plans derailed progress.
From 2012 to 2016, there was no policy at all, freezing vendor expansion. Then the ADP 2016-21 went in the opposite direction, offering heavy incentives to new entrants.
“These included a 50% duty cut on already localised parts. This didn’t boost localisation but instead encouraged imports and hurt vendors who had already invested in local tooling,” said Qadir. He said the current AIDEP 2021-26 also promises support for exports and parts development, but fiscal changes and selective enforcement have again created uncertainty for suppliers.
Qadir added that used car imports pose another major threat. These vehicles now make up about 25% of the market, with over 40,000 units. “This is due to low fixed duties on used vehicles under 1300cc and the allowance to import five-year-old vans,” he said. “Used cars now rank second in market volume after locally produced Suzuki vehicles and surpass Toyota, Honda, Hyundai, Kia, Haval, MG, and Changan.” He alleged that used car imports are a haven for black money. “These imports and sales remain undocumented. Remittances are sent via Hawala, and sales are made in cash, damaging local manufacturers,” he claimed.
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