Pak Suzuki Motor Company (PSMC) has decided to further extend the shutdown of its automobile plant by four more days on account of dearth of imported auto parts.
The company has decided to further extend the shutdown of its automobile plant from August 22, 2022 to August 26, 2022. In a written notice, the Japanese automaker conveyed this to the Pakistan Stock Exchange (PSX).
According to the bourse filing, this shutdown is partly due to a circular of the State Bank of Pakistan (SBP) seeking prior approval for completely knocked down (CKD) units.
However, Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) Chairman Abdul Rehman Aizaz believes “this is the principal reason”.
Only 50% import of CKD is allowed for the automobile sector, he explained while talking to The Express Tribune.
As per the latest material information, PSMC has extended its plant shutdown for automobiles, confirmed Aba Ali Habib Securities auto analyst Ali Asif.
“In total, for the month of August, we are looking at seven non-production days (NPDs) for PSMC. The shutdown is mainly due to non-availability of automobile parts which is likely to result in a major decline in auto sales for August,” he added.
“This will continue to hurt the profitability of the company,” said Topline Securities auto analyst Sunny Kumar. “We expect a 35% decline in volumetric sales for fiscal year 2023,” he added.
“Letters of Credit (LCs) for import of sub-components by parts manufacturers is still not allowed. Even if 50% CKD is imported, still the assembly of vehicles is not possible,” Paapam chairman noted.
State Bank is considering the request of vendors to allow import of sub-components, he said.
In such a situation, the production, employment, availability of cars, motorcycles and tractors cannot continue, said Paapam chairman. Taxes from the automobile sector will nosedive as well, he observed.
“PSMC’s temporary shutdown has been extended owing to material shortages caused by delays in the clearance of import consignments”, said AL Habib Capital Markets auto analyst Asad Ali.
The State Bank has restricted the import of CKD kits and auto parts to curb dollar outflows and import bills, he explained.
Due to this, auto companies are facing supply constraints in their assembly operations as around 60-70% of their raw material are imported, he said. “We request the government and State Bank to allow 100% import of CKD and sub-components for motorcycles, tractors and rickshaws. In these sectors, minimal foreign exchange is needed for imports due to over 90% localisation,” said Paapam chairman.
“We also request to allow import of sub-components by parts manufacturers without any restriction,” he added.
Published in The Express Tribune, August 19th, 2022.
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