Honda & Indus Motors shut down car production temporarily

The imposition of taxes and federal excise duties have plummeted car sales and as inventories continue to pile up, Honda Atlas Cars Pakistan and the Indus Motor Company have decided to shut down production for ten and eight days respectively.

Honda

News Desk |

Honda Atlas Cars Pakistan (HACP) on Friday disclosed a decision to shut down its manufacturing plant for 10 days as the inventories have risen to 2,000 units given the decline in car sales and heightened costs due to the implementation of higher taxes in the new federal budget, and the excessive rupee devaluation.

Indus Motor Company (IMC), the producers of Toyota vehicles across Pakistan, have also decided to suspend car manufacturing for the next eight days, taking two days off each week throughout this month.

Earlier last week, Honda also shut down its plant for two days. Reports circulating on media reveal that Honda will examine the trends in sales during the upcoming days, and upon analyzing the trend of orders and bookings during the month July, it will decide whether or not to cut down production further.

During the last fiscal year, the overall car and light commercial vehicles sales have reduced by 7%, reducing to 24,335 units. 

Speaking to a reputable newspaper, the executives of Honda Atlas Cars Pakistan and the Indus Motor Company have revealed that the decisions to cut down car production during the month of July has been taken in light of the reduced demand for cars and plummeting sales observed during the first 10 days of the ongoing month.

The steep increment in car prices after heightened rupee devaluation, and the implementation of the Advance Customs Duty (ACD) on all the imports, and the Federal Excise Duty (FED) on all assembled cars, has caused a sharp decline in sales and inventories continue to pile up in warehouses. The executives of HACP were left with no choice but to shut down the production plant and reduce their manufacturing processes. If the ongoing trend of the lack of sales continues, the executives expect their sales to decrease down to less than 30,000 units during the year April 2019 to March 2020, as compared to the 48,000 units sold last year.

Officials from IMC also cited similar reasons for shutting down production for eight days during the ongoing month of July. The official, speaking on condition of anonymity with Dawn, noted that the situation for local car manufacturers is rather bleak as the inventory keeps piling up and sales have decreased dramatically. The official noted that production will be further reduced if the sales volume does not increase next month.

Read more: Honda’s annual sales fail to meet expectations

The reduction in car sales is a trend that has been persistently observed during the last three months. Reports indicated that the total volume of car and light commercial vehicles were reduced by 5% to 17,561 units in June 2018. During the last fiscal year, the overall car and light commercial vehicles sales have reduced by 7%, reducing to 24,335 units.

This reduction is observed after the implementation of the 5% Advanced Customs Duty (ACD) on raw materials and automotive parts required by local car assemblers, accompanied by the implementation of 2.5-7.5% Federal Excise Duty levied from 1st July, which has ushered forward a sharp decline in car sales.


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