Web Desk — Pak Suzuki Motor Company’s (PSMC) motorcycle and four-wheeler plants will remain closed from June 22 to July 8.

The company, while giving the reason for the plant closure, says it is facing an acute shortage of parts and other accessories owing to a mechanism the State Bank introduced in May 2022.

According to this mechanism, the auto assemblers have to seek prior approval for the import of completely knocked-down (CKD) kits, which has adversely affected the clearance of consignments, thus affecting inventory levels.

Due to the same issues, Pak Suzuki had to keep its four-wheeler plant shut for over 75 days from August 2022 till June 19.

In May 2023, the company sold 2,958 vehicles compared to 1,474 units in April 2023. Pak Suzuki had to bear a massive fall of 54pc to 62,354 units in 11MFY23 from 134,270 units in the same period last fiscal year.

The auto-makers are facing a serious crisis after the SBP put curbs on opening fresh LCs. This has adversely affected the arrival of completely knocked-down kits being imported by local assemblers, which went down by 54pc to $712 million in 11MFY23 from $1.558 billion in the same period last fiscal year.

PSMC Plant Closures

This is not the first time PSMC earlier closed its motorcycle plant till June 16, 2023. The company shut both its automobile and motorcycle plant from May 2 to May 9 for want of raw materials. The plant was shut from April 7 to April 28 too.

PSMC – Pakistan’s Major Auto-Maker

PSMC is one of the major automakers in Pakistan. It not only manufactures and assembles but also markets Suzuki cars, vans, pickups, 4x4s, and motorcycles as well as related spare parts.

PSMC Facing Severe Crisis

The auto manufacturer, back in April, recorded the highest-ever quarterly loss of Rs12.9 billion in the first three months of 2023 due to a reduction in sales and high finance costs. Pak Suzuki has to pocket a loss of Rs460.227 million in the same period last year.

Pakistan’s Auto Sector Bearing Several Crisis

Currently, Pakistan’s auto industry is facing several crises. Other listed companies, such as Indus Motor Company Limited and Honda Atlas Cars also halted production in recent months due to economic difficulties.

A statement, from the Pakistan Association of Automotive Parts and Accessories Manufacturers, says more than 25,000-30,000 workers in the auto sector have lost their jobs due massive drop in sales.

Auto Loans

The number of outstanding auto loans continuously went down for the 11th consecutive month. They plunged by Rs9bn, or 2.8pc, to Rs300bn in May from Rs309bn in April.

As per data released by the SBP, the total decline in auto financing to date stands at Rs68bn. According to economic experts, an increase in the interest rate to 21pc from 7pc in March along with multiple other measures by the central bank to slow down auto financing and demand for four-wheelers, is now finally bearing fruit.

The shrinking sales have led the car assemblers to shut their plants, which will definitely result in heavy unemployment both directly and indirectly.

Just to remind you, the SBP imposed various restrictions, like an upper limit of Rs3m on auto loans and a reduction in loan repayment tenor.

Business Confidence Dropped

The Overseas Investors Chamber of Commerce and Industry recently conducted a survey on Pakistan’s current economic crisis. According to that survey, business confidence in the country has dropped 21 percentage points to -25% in March-April from -4% recorded in September-October 2022.

The survey found high inflation, high taxation, and devaluation as three major threats to business growth in Pakistan.

Important Note:

Pak Suzuki has extended the shutdown for another week due to an ongoing shortage of inventory level. The company, in an earlier notification, had announced the plants’ shutdown from June 22 to July 08, 2023. Now, it has been extended till July 15.