Auto Sector of Pakistan Fears Massive Layoffs

The current economic crisis has severely dented various sectors & industries of the country. The auto sector is no exception since many companies have been observing non-production days & plant shutdowns because of a lack of inventory in hand due to import restrictions imposed by the State Bank of Pakistan (SBP) & difficulties in the issuance of the Letter of Credit (LCs).

Now various industry stakeholders are warning about massive layoffs ahead as it was getting difficult for them to sustain the present level of the workforce. A key official of a listed car company on condition of anonymity, while speaking to Business Recorder said:

“If this (issue) persists, there will be massive layoffs across Pakistan. We are trying to retain the workforce for as long as possible. But we will not be able to hold this position for very long.”

Pakistan’s auto industry, which has always been highly dependent on imports, has been caught in the midst of a crisis, as the SBP, after unabated rupee depreciation, imposed restrictions on the opening of LCs. Along with many other sectors, the auto sector (classified under non-essential imports) is facing difficulty in importing CKD parts and raw materials as the country struggles with depleting foreign exchange reserves.

According to Munir K. Bana, Chairman Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM):

“We are also keeping our factories shut for a few days a week due to a lack of demand from OEMs. We send our workers home and pay them half their wages. We are trying to keep things rolling for everyone for as long as possible.”

Since December alone, over 14 listed companies including major auto assemblers have announced scaling back or shutting down operations citing varying reasons including inability to obtain LCs, supply chain disruptions, inventory shortages, drop in demand, and energy shortage.

Sales of locally assembled cars in Pakistan have already been reduced to half. But even if supply chain issues are resolved, the prices of new cars have been hiked so insanely in recent months that sales are unlikely to pick up in the future.

Full story: Business Recorder

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