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Wednesday, April 24, 2024

Toyota Motors shuts its power plant in Pakistan

The Indus Motor Company Limited (IMC) has decided to temporarily shut down its production plant from February 1 to February 14.

The company in an official notice cites inventory shortage as a reason to close the production plant in Pakistan.  The statement also suggests that the vendors faced major hurdles in the imports of raw materials and CKD units due to the latest import restrictions by the government. Moreover, clearance of consignments from commercial banks and opening of letters of credit (LCs) was also major challenge for the company.

In a legal notice to the Pakistan Stock Exchange (PSX), the company has briefed that it would restart its production on February 15, on a single-shift basis.

The notice reads as;

“In light of the recently introduced mechanism vide EPD Circular No. 20 of 2022 dated December 27, 2022, (effective from 2nd January 2023), commercial banks are advised to prioritize/facilitate the imports to specified sectors only, which does not include auto sector,”

It further adds;

“This has disrupted the entire supply chain and the vendors are unable to supply raw materials and components to the company. Accordingly, the company has insufficient inventory levels, therefore, the company is unable to continue its production activities,”

Earlier, the company had increased its car prices up to Rs 1.16 million, following significant depreciation of the Pakistani rupee against the US dollar. This was IMC’s second price hike in two weeks. Besides IMC, other companies like Suzuki Motors and Honda Atlas have also increased their car prices amidst increasing exchange rates of the US dollar against Pak Rupee.

Read more: Supply issues cause Honda to reduce output at Japanese plants

Last month the central bank decided to withdraw the restrictions placed on imports with effect from January 2, 2023. However, the restrictions on Auto Industry were not removed as the State Bank prioritized its essential imports such as; energy imports, imports by export-oriented industries, imports for agriculture inputs, deferred payment or self-funded imports, and imports for export-oriented projects near completion.

In addition to import restrictions, rupee depreciation is also hampering the Auto Industry. According to the data released by Pakistan Automotive Manufacturers Association, automobile sales in Pakistan fell 38% in December 2022 to 16,811 units on a year-on-year basis.