In a severe setback to Pakistan’s automotive industry, three of the country’s major car manufacturers – Toyota, Honda, and Pak Suzuki – have announced temporary closures of their production facilities due to a multitude of challenges.
These announcements have come amidst a series of shutdowns and inventory issues, signaling a turbulent period for the automobile market in the country.
Toyota Pakistan’s extended production halt
Indus Motor Company (IMC), the assembler of Toyota vehicles in Pakistan, has declared another production shutdown, marking the ninth such closure in 2023. This extended shutdown is set to take place from October 17 to November 17, 2023, according to a statement released by the company to the Pakistan Stock Exchange (PSX).
The primary reason cited for this hiatus is the dire shortage of raw materials and a scarcity of dollars, which has disrupted the supply chain, impacting the company’s ability to maintain regular production. This comes on the heels of a previous shutdown from September 28 to October 9, also attributed to inventory problems. In their latest financial statements, IMC reported a significant decrease in profit-after-tax (PAT) of Rs9.66 billion in FY23, a decline of nearly 39% compared to the previous year.
Honda and Pak Suzuki temporarily shut production
Honda Atlas, another prominent car manufacturer in Pakistan, is set to halt its production from October 24 to October 31, citing similar issues with raw material shortages and difficulties in obtaining necessary financial resources for their operations.
Pak Suzuki, a key player in the country’s automotive sector, is also joining the temporary shutdown trend. Their plant operations will cease from October 25 to October 27, with the exception of their motorcycle plant which will continue to operate. The reasons behind Pak Suzuki’s decision are similiar to those faced by Toyota and Honda, with raw material shortages and financial constraints hampering their ability to sustain regular production.
Challenges hurting the Auto Industry
The Pakistani automobile industry is facing a host of challenges, with one of the main issues being the scarcity of raw materials. Additionally, difficulties in opening Letters of Credit (LCs) due to financial constraints faced by banks are causing significant disruptions in the supply chain. This has resulted in a cascade of problems for manufacturers who rely heavily on imports.
The situation is exacerbated by the government’s recent decisions to curb imports and restrict the issuance of LCs, further exacerbating the auto industry’s woes.
High finance costs and a substantial increase in car prices have also played a role in reducing consumer demand, leading to a 40% decline in sales during the first quarter of FY24.
The recent series of production halts by Toyota, Honda, and Pak Suzuki reflects the challenges facing Pakistan’s automotive industry. These issues, including raw material shortages, financial constraints, and supply chain disruptions, raise questions about the industry’s future, leaving both manufacturers and consumers in a state of uncertainty.