PSMC extends plant closure

Pak Suzuki Motor Company (PSMC) has announced an extension in its plant shutdown due to a shortage of Completely Knocked Down (CKD) parts. Analysts fear this will put pressure on local vendors.

As explained earlier, in a letter dated August 16, 2022 on the above subject, the State Bank of Pakistan (SBP) introduced a mechanism for prior approval for import under HS code 8703 category (including CKDs) vide circular No 09 of 2022 dated May 20, 2022, read the notice issued to the Pakistan Stock Exchange (PSX). Restrictions had adversely impacted the clearance of import consignments which resultantly affected inventory levels.

“PSMC has extended its shutdown owing to supply constraints regarding import clearance of CKD kits,” said Al Habib Capital Markets Auto Expert, Asad Ali. Auto assemblers have been dealing with this supply disruption for quite some time, which has had a significant negative impact on vehicle sales in August 2022, he added.

“Due to the shortage of inventory levels, the management of the company had decided to shut down the automobile plant till September 9, 2022,” stated the company notification. However, due to the continued shortage of CKD raw materials, the management has decided to extend the date of shutting down the plant from September 12, 2022 to September 16, 2022.

“In lieu of periodic maintenance, the automobile plant will also be shut down from September 19, 2022 to September 23, 2022,” said the bourse filing. The motorcycle plant, however, will remain operational and any further updates in this regard will be communicated accordingly.

Aba Ali Habib Securities Auto Analyst, Ali Asif said that “PSMC is still struggling to get LCs, causing a shortage of CKD raw materials. Given this situation, PSMC has extended its non-production days to around 19 for September. Regarding demand, we believe non-availability of cars will simply lead to pent-up demand for the vehicles”.

“The shutdown was primarily due to shortage of CKD parts but partly on account of maintenance the company wanted to carry out during this time,” noted Topline Securities Auto Analyst, Sunny Kumar.

Auto expert Mashood Ali Khan highlighted that “the auto industry is facing the challenge of unavailability of CKD parts.” This is also the case for all OEMs. We have been witnessing this for the last two months and there is no hope in sight, he lamented.

Published in The Express Tribune, September 7^th, 2022.

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