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Thursday April 18, 2024

Inventory crunch forces Suzuki to halt car production for 5 days

Japanese carmaker's Pakistani arm cites severe shortage of inventory for plant shutdown

By Business Desk
February 08, 2023
Suzuki Swift cars roll off the assembly line at an auto plant. — AFP/File
Suzuki Swift cars roll off the assembly line at an auto plant. — AFP/File

Pak Suzuki Motors will shut down its automobile plant for nearly a week owing to inventory shortfall as the commercial banks continue to stonewall the importers' requests for opening letters of credit (LCs) due to a tight forex position.

The dollar shortage has hit import-based businesses hard as the government faces an uphill task in convincing the International Monetary Fund (IMF) to revive a suspended loan programme.

The revival of IMF’s extended funding facility will help Pakistan shore up its depleting forex reserves, which stand at an alarming level of around $3 billion — enough for just three weeks' worth of imports.

In a letter to the Pakistan Stock Exchange (PSX), the company mentioned that "due to continued shortage of inventory level, the management of the company has decided to shut-down automobile plant from February 13, 2023 to February 17, 2023".

However, the Japanese carmaker's Pakistani arm noted that the motorcycle plant would remain operative.

It is the fourth announcement by the company of putting the brakes on its production activities in 2023 — first from January 2 to January 6, then from January 9 to January 13, and later on from January 16 to January 20.

The development comes after the company hiked the rates of its various car models by up to Rs355,000 last month owing to an increase in the cost of production — due to the rupee's slump versus the dollar.

Passenger car sales plunged 44% in December from a year earlier, dropping to 13,768 units, against 24,471 units recorded in December 2021, as per data released by Pakistan Automotive Manufacturers Association (PAMA).

Pak Suzuki had reported a decline of 8% month-on-month to 11,342 units, it added.

It should be noted that PSMC is engaged in the assembling, progressive manufacturing, and marketing of Suzuki cars, pickups, vans, 4x4s, motorcycles, and related spare parts.

Indus Motor Company (IMC), the maker of Toyota vehicles, had also decided to “completely” shut down its production plant in the country from February 1 to 14, citing “insufficient inventory levels”.

In a letter to the PSX, the IMC management said that in light of the recently introduced mechanism vide EPD Circular No. 20 of 2022 dated December 27, 2022 (effective from January 2), commercial banks were advised to prioritise/facilitate the imports to specified sectors only, which did not include auto.

“The company and its vendors continue to face major hurdles in import of raw materials and receiving clearance for their consignments from commercial banks,” the notice read.

Moreover, the company has also decided to start its production on a “single shift” basis from February 15 until further notice.