Pak Suzuki Motor Company Ltd has confirmed the closure of its motorcycle and four-wheeler manufacturing plants from June 22 to July 8 due to component shortages.
A statement attributed the production halt to a shortage of parts and accessories. This scarcity results from a policy implemented by the State Bank of Pakistan (SBP) in May 2022, requiring prior approval to import completely knocked-down kits. This has negatively impacted the clearance of consignments and inventory levels.
The four-wheeler plant had been shut down for over 75 days from August 2022 to June 19, 2023. In May 2023, the company sold 2,958 vehicles, an increase from the 1,474 units sold in April 2023. However, year-on-year sales witnessed a significant 54% drop to 62,354 units in the first 11 months of the fiscal year 2023, compared to 134,270 units during the same period in the previous fiscal year.
The SBP’s restriction on opening fresh Letters of Credit (LCs) has led to a 54% decrease in the import of completely knocked-down kits, dropping to $712 million from $1.558 billion year-on-year.
Auto financing has also decreased, with outstanding auto loans falling by Rs9bn, or 2.8%, to Rs300bn in May from Rs309bn in April. This marks the 11th consecutive month of decline.
Following the increase in the interest rate to 21% from 7% in March, along with various measures to curb auto financing and demand for four-wheelers, a decrease in car sales has resulted in widespread unemployment, especially in vending units.
Auto financing is projected to remain stagnant for the next six months due to the limited financing cap of Rs3m. The recovery of auto financing activities will largely depend on political stability, the dollar crisis resolution, and the IMF loan’s approval.
