Shortage of parts: Pak Suzuki Motors to shut production for five days

In a latest sign of the problems faced by the auto industry, the Pak Suzuki Motors Company on Monday decided to shut down its plants for automobile and bike production from January 2 to January 6, 2023.

The company cited the restrictions imposed by the State Bank of Pakistan (SBP) and the resultant shortage of parts as the reasons in a filing to the Pakistan Stock Exchange.

It was referring to the introduction of a mechanism for obtaining prior approval for imports of CKD (Completely Knocked Down) Kits – the loose parts necessary to assemble a complete vehicle in a customer’s own plant.

“Restrictions had adversely impacted clearance of import consignment which resultantly affected the inventory levels,” the statement read.

“Therefore, the company is unable to continue its production activities and decided to temporarily shut down the production of both plants.”

On Monday, the share price of company stood at Rs138.78, which represented an increase of 3.76 percent.

It is not the first

Last week, the Indus Motor Company Limited too blamed the SBP conditions and shut production of Toyota vehicles for 11 days, as it faces shortage of raw material and components.

According to a filing submitted with the Pakistan Stock Exchange, the operations at the production plant would be closed December 20 to December 30.

The company says the SBP has introduced a mechanism for obtaining prior approval for import of CKD Kits and components of passenger cars.

It added, “The delay in aforesaid approvals for the company and its vendors has created hurdles in import and clearance of consignments for raw materials and components of the company.”

The central bank’s move has resulted in insufficient inventory levels and consequently have created an adverse impact on the supply chain and production activities, the company said. “Therefore, the Company is unable to continue its production activities.”

Earlier, it was reported that net automotive loans saw a reduction of 1.4 percent on month-on-month basis in October, representing fourth consecutive month downward trend, as higher cost of living is reducing the demand.

The credit data released by the State Bank of Pakistan showed that the 1.4 percent decrease amounts to Rs4.9 billion contraction, as the first four months (July-October) of the FY 2022-23 with a total reduction of Rs22.658 billion. It is a 160 percent year-on-year decrease when compared with the same period of FY 2021-22.

Last month, the Bolan Castings Ltd – the makers of various auto parts of tractors and commercial vehicles – informed the Pakistan Stock Exchange about suspending the production activities from Dec 5 to Dec 23. It cited the drop in sales due to a drastic fall in orders from its assemblers as the reason.

Its revenue had plunged to Rs474 million during the first three months of the current financial year from Rs621 million when compared with the last fiscal year.

On the other hand, the production activities of Baluchistan Wheels Ltd – the makers of steel wheel rims for cars, heavy vehicles and farm tractors – said the production activity would remain suspended from Dec 12 to 23 amid a reduced demand.

Earlier, the company’s revenue had dipped 26 percent to Rs403 million in the first quarter from Rs547 million in the same period last fiscal year.

Competition

Meanwhile, increase in interest rates, rising cost of imports and the prevailing uncertainty mean a tough competition between the Korean and Chinese auto assemblers and their Japanese counterparts.

That’s why the Korean and Chinese auto assemblers are offering price cuts, and various packages to attract customers, while the Japanese assemblers have been avoiding such moves.

Instead, the Indus Motor Company recently opted for raising the per unit prices by Rs190,000 to Rs700,000.

In September 2019, it had decided to shut down all production as the plant remained closed for 15 days during that month.

The reason was the federal excise duty (FED) of 2.5 to 7.5 percent on various engine capacity cars, sky rocketing prices on account of rupee-dollar parity coupled with additional customs duty on imported parts and raw material and high interest rates

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