Monday, June 17, 2024

Pakistan’s premium motor company shuts down plants amid new import policy

The Pak Suzuki Motor Company Ltd has announced to shut down of its motorcycle and four-wheeler plants from June 22 to July 8 due to a shortage of parts and accessories due to a new mechanism introduced by the central bank of taking prior approval for all imports, adversely affecting the clearance of consignments and inventory levels.

The company said that the new import policy introduced by State Bank of Pakistan (SBP), making it mandatory to take prior approval of the import of completely knocked-down kits, has had a major impact on the inventory levels of the company.

Pak Suzuki is also suffering to major losses in terms of its production and sales as it recorded a steep fall of at least 54 per cent from at least 134,270 units to 62,354 units in 11MFY23 in the same period during the last fiscal year.

During the same period of the last fiscal year, the imports stood at $1.55 billion, while during the current fiscal year, they have fell by 54 per cent to only $712 million.

This has also had a negative impact on the auto-financing and outstanding auto loans as they also continued their downward trajectory for the 11th consecutive month.

As per details, the outstanding auto-loans plunged to by 9 billion PKR to 300 billion PKR in May 2023, pushing down the total decline in auto-financing by at least 68 billion PKR.

“The increase in the interest rate to 21 per cent from 7 per cent in March, following by various measures by central bank to slow down auto financing and demand for four-wheelers, is now finally paying off because shrinking sales, car assemblies has resulted in heavy unemployment of people, both directly of indirectly, especially in the vending units,” said a source in the Pak Suzuki.

“High interest rates, prices and production suspension have adversely been affecting auto-financing. Current share of auto-financing in total car sales ranges between 1-2 per cent, on contrast to 25 – 30 per cent during the period of high vehicle demand and low prices,” said Tahir Abbas, Head of Research at Arif Habib Limited.

The revival of auto-financing activities depends on the resolution of political stability, alleviation of dollar crisis and most importantly on the approval of the IMF loan.

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