Pak Suzuki once again halts production for two weeks

• Decision taken due to shortage of inventory level.
• Production at both its car and bike plants will be halted.
• Back-to-back production shutdowns led to layoffs.

KARACHI: Inventory shortage continues to trouble the auto industry as Pak Suzuki Motor Co. Ltd (PSMC) announced another shutdown for two weeks at both its car and bike plants.

The company made the announcement in a statement released to the Pakistan Stock Exchange.

“Due to shortage of inventory level, the management of the company has decided to shut down motorcycle and automobile plant from June 22, 2023 to July 8, 2023,” the notice read.

Auto is one of the sectors affected by current economic conditions in Pakistan as the importers have been struggling to get their letters of credit (LCs) issued amid the low foreign exchange reserves of the country. 

The forex reserves held by the State Bank of Pakistan are standing at $4 billion which can only cover a month’s imports of the country.

The ongoing shortage of raw materials has plagued the company for a year. PSMC had recently kept its bike plant shut from May 23 to June 16. The automobile plant also remained closed at the start of the previous month. Other companies such as Indus Motor Company have also announced multiple shutdowns on import restrictions.

Amid an economic downturn in Pakistan and a decline in purchasing power on record inflation, car sales have drastically dropped in a year.

In May 2023, car sales plunged by 80% year-on-year, according to Pakistan Automotive Manufacturers Association. In the 11 months of FY23, a total of 92,554 units have been sold, down 56% against 210,633 units sold during the same period in FY22.

On a month-on-month basis however, PSMC recorded a growth of 101% to 2,958 units in May 2023, led by a jump in sales of Alto (+132% month-on-month), Swift (+129% month-on-month), and Cultus (+59% month-on-month). 

The significant increase was due to the low base and availability of CKD (completely knocked down) parts, according to Sunny Kumar, an analyst at Topline Securities.

Back-to-back production shutdowns by companies in Pakistan have led to massive layoffs in the country. According to a statement by the Pakistan Association of Automotive Parts and Accessories Manufacturers, more than 25,000-30,000 workers in the auto sector have lost their jobs due to an unabated drop in annual sales.

As the government struggles to win an IMF deal before the current bailout programme ends on June 30, business confidence in the country has dropped 21 percentage points to -25% in March-April from -4% recorded in September-October 2022, according to the latest survey conducted by the Overseas Investors Chamber of Commerce and Industry. 

The three major threats to business growth identified in the survey were high inflation, high taxation, and devaluation.

Originally published in The News