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Pakistan’s Top 2 Assemblers to Observe Partial Plant Shutdowns

Pakistan’s two leading auto assemblers, Toyota and Suzuki will observe partial plant shutdowns next month due to unavailability of raw material amid import restrictions and exchange rate volatility, according to a report published by Reuters.

The government in recent weeks has attempted to curb imports in the face of fast depleting foreign reserves, a declining currency and a widening current account deficit, because of which the rupee has lost over 20% of its value within the last couple of months.

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The move has had a cascading effect on industries that rely heavily on imports as the central bank has delayed the clearance of letters of credit (LC) with banks facing a shortage of dollars, affecting their ability to import materials. According to Ali Asghar Jamali, the CEO pf Indus Motor Company (IMC), the assemblers of Toyota cars in Pakistan:

“There will be 10 working days next month, only if central bank allows us to open letter of credit based on the quota they promised.”

IMC is offering refunds to customers facing delays and markups on their payments, with deliveries likely to be delayed by at least three months and prices to be revised as the country does not have dollars available. Reserves with the central bank have fallen to as low as $9.3 billion, enough to cover less than two months of imports. The current account deficit for the last financial year touched 5% of GDP with imports also hitting record high.

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Pak Suzuki echoed similar sentiment, citing the central bank’s new mechanism for prior approval for imports. According to the head of public relations at Pak Suzuki, Shafiq A. Shaikh:

“Restrictions had adversely impacted clearance of import consignments from ports. The unavailability of materials may result in a plant shutdown in August and if the same situation continues, then from August 2022 we will have big problems.”

Analysts believe if the situation persists, it will pose bigger threat to the future of local auto assemblers in Pakistan, particularly the smaller players & newcomers in the business.

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