The Indus Motor Company (IMC), Toyota’s manufacturing arm in Pakistan, has decided to shut down its plant for two days due to an insufficient inventory.
The shutdown, scheduled for June 26 and 27, marks the fifth time the company has been forced to cut production this year.
IMC company secretary, Muhammad Arif Anzer, disclosed this development to the Pakistan Stock Exchange (PSX), explaining that the company’s inventory levels are currently too low to sustain production activities.
Import of Raw Materials
IMC and its vendors are grappling with obstacles in importing raw materials and obtaining clearance for their consignments. These hurdles stem from difficulties opening letters of credit (LCs) and supply issues experienced by certain foreign vendors. As a result, the company’s supply chain is disrupted, rendering vendors incapable of supplying necessary raw materials and components to IMC.
So far, in 2023, IMC has already observed non-production periods four times, demonstrating the ongoing and severe challenges faced by the auto industry in Pakistan.
The Auto Industry
The auto sector is among the most affected by Pakistan’s economic struggles. Importers are finding it increasingly difficult to have their LCs issued, primarily due to the country’s dwindling foreign exchange reserves. As of June 16, these reserves stood at a scanty $3.5 billion, barely enough to cover a month’s worth of imports.
The incumbent government has been implementing measures to curb imports to preserve fast-changing forex reserves. Although this strategy has led to a current account surplus in recent months, it has also triggered an economic slowdown across the country. Import restrictions have particularly impacted industries that rely on imports to produce their finished goods.
Auto Sales
The impact of this crisis is visibly seen in the massive drop in car sales and subsequent layoffs in the industry. Earlier this week, Pak Suzuki Motor Co Ltd also announced a two-week shutdown at its bike and automobile plants, attributing this to inventory shortages.
According to the Pakistan Automotive Manufacturers Association, car sales experienced an alarming 80% year-on-year drop in May 2023. During the first 11 months of FY23, only 92,554 units were sold, representing a 56% drop from the 210,633 units sold during the same period in FY22. The IMC’s profits in the July-March period of FY23 fell by 62% compared to the same period in the previous year.
