Material shortage forces Pak Suzuki to halt plant for 5 more days

KARACHI: Pak Suzuki Motor Co Ltd (PSMC) has announced another five-day closure of its automobile plant, from February 13 till February 17, 2023, a bourse filing said on Wednesday.

The decision was made due to the persistent shortage of raw materials, as per the statement to the Pakistan Stock Exchange. However, the company's motorcycle plant will continue to operate.

PSMC secretary said, “Due to the continued shortage of inventory, the management of the company has decided to extend the shutdown of the automobile plant from February 13th to February 17th, 2023. The motorcycle plant will remain operative."

This latest closure follows previous shutdowns of both the automobile and motorcycle plants from January 2-6, 2023 and then again for five more days in January.

A spokesperson for PSMC stated that the current situation was very critical for the company, as import restrictions have caused major disruptions to the supply chain.

Highlighting the challenges posed by detention, demurrages, and kibor+3 percent, he expressed concern for the well-being of both dealerships and vendors. The spokesperson also requested the Pakistani government to have an urgent discussion with the industry to address these issues.

The shortage of raw materials has also affected other car manufacturers in the country. Indus Motors plant is already closed from February 1 till February 14, 2023.

The shutdown of car manufacturing plants in Pakistan has not only affected the manufacturers but also their suppliers. The auto spare parts industry has also being impacted, as suppliers are facing a decrease in production volume from their major customers.

Agriauto Industries Limited, a leading supplier of auto parts to manufacturers such as Indus Motors, Honda, and Pak Suzuki, has announced a partial shutdown for the month of February 2023 due to a reduction in production volume from their major customers.

Agriauto Industries Limited secretary said, “Due to the reduction in production volume of our major customers, the company will be observing a partial shutdown during the month of February 2023.”

An analyst stated that the announcement of the shutdown of Pak Suzuki’s automobile plant for five days highlights the persistent challenges faced by the auto industry in Pakistan, due to the shortage of raw materials and import restrictions.

“The situation has far-reaching consequences, affecting not only the car manufacturers but also their suppliers and dealerships. The government is being urged to take action and engage with the industry to address these pressing issues,” he added.

Pakistan’s leading tyre manufacturer, General Tyre (GTR), is also facing challenges, with the closures of auto manufacturing plants and the smuggling of tyres in the country. Despite investing heavily to increase production capacity to meet growing demand, the illegal sale of smuggled tyres was jeopardising the industry’s investments.

GTR CEO Hussain Kuli Khan stressed the need for revisiting the Afghan transit trade agreement, which was being misused for smuggling. According to Khan, the smuggling of tyres accounts for over 50 percent of total sales in the market, resulting in a loss of approximately Rs50 billion to the national exchequer. In addition to smuggling, the CEO highlighted the impact of administrative controls by regulatory authorities on the industry. The controls have caused frequent plant closures and a decline in auto sales, as local automakers face issues with opening credit letters for CKD imports.

Khan believes that the government can help the industry by allowing LCs to be opened for raw materials and taking steps to curb smuggling. He stated that this would not only raise tax revenue but also help the local industry compete and grow.

“Though the FBR has improved enforcement by taking strict measures at the customs level, still a lot more effort is required. It is also necessary to check the stock in the markets and take action against sellers by confiscating illegally imported tyres,” Khan added.