Baluchistan Wheels halts production

Attributes decision to reduction in demand from vehicle manufacturers

KARACHI:

Baluchistan Wheels, the manufacturer and marketer of automotive wheel rims for small cars, big buses and trucks, announced on Thursday that it was shutting down production for two weeks in the wake of a significant reduction in demand for its products from vehicle manufacturers.

In a notification to the Pakistan Stock Exchange (PSX), Company Secretary Muhammad Asad Saeed said that due to a reduction in production volumes of its major customers (original equipment manufacturers or vehicle makers), the company was facing a drop in its sales orders.

Resultantly, the management has decided to temporarily close production activities on account of non-production days from August 18 to 31, 2023. “Production activities would resume on September 1, 2023,” Saeed said.

This is for the third time in the past eight months that the company has taken production break. It aims to cope with the slowdown in demand for its products and vehicles due to a significant rise in automobile prices and a jump in interest rate on auto financing beyond affordable levels.

In its last financial report for nine months ended March 31, 2023, Baluchistan Wheels reported that sales of car wheels decreased 41% to Rs624 million compared to Rs1.05 billion in the same period of last year.

Furthermore, sales of truck and bus wheels dropped 20% to Rs148 million compared to Rs186 million last year while sales of tractor wheels dipped 24% to Rs523 million compared to Rs693 million in the previous year.

Automotive demand dropped more than half to 7,761 units in July 2023 alone. “The demand is expected to stabilise around current levels in forthcoming months of the current fiscal year,” said Foundation Securities Head of Research Muhammad Awais Ashraf while talking to The Express Tribune.

Demand for automobiles like cars, trucks, tractors and buses took a massive hit in FY23 owing to restrictions on luxury imports by the government in the wake of critically low foreign exchange reserves, a record rupee depreciation and record high interest rate.

The government removed all restrictions on imports in July. Despite that, the analyst said, economic slowdown, a significant rise in vehicle prices and the surge in interest rate on auto financing would keep the demand for vehicles low in FY24.

The company said in its financial report that net profit decreased 35% to Rs105.93 million in the nine-month period compared to Rs163.08 million in the corresponding period of last year.

The decline in gross and net profit can be attributed to the depressed demand for wheels in all segments, which is due to plant shutdown by various assemblers in the auto sector.

Published in The Express Tribune, August 18^th, 2023.

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