Sazgar temporarily shuts down car plant on raw material shortage

KARACHI: Sazgar Engineering Works Limited, one of Pakistan's leading auto manufacturers, on Friday announced temporary shutdown of its four-wheeler car plant for a week, blaming raw material shortages.

The plant operations will remain suspended from February 27 to March 4.

The company cited the government's measures to minimise the imports amid depleting foreign exchange reserves as a major reason for the temporary shutdown.

"Due to the government's stringent measures of minimising the import of CKD and raw material of vehicles, the company's supply chain has been disrupted and thereby the company has decided to shut down its car plant (four-wheeler plant) from February 27, 2023, to March 04, 2023," it said in a statement to the Pakistan Stock Exchange (PSX).

However, its three-wheeler and automotive parts manufacturing plants will remain in operations during the said period.

Sazgar Engineering launched Pakistan's first hybrid vehicle "Haval" in November 2022, which used the Chinese CKD and sub-assembly plant, a move that was seen as a significant milestone for the company as well as for the Pakistani automotive industry.

The current situation is not unique to Sazgar only, as many other major auto manufacturers, including Indus Motors and Pak Suzuki Motors, are also facing hardships due to non-import of raw materials. As a result, they are working on shorter working days.

The decline in Pakistan's foreign exchange reserves has been cited as the primary reason for the crisis being faced by the auto manufacturing industry. The curbs on raw material imports have further compounded the situation, leading to a shortage of materials and parts necessary for the production of vehicles.

The situation is concerning for the automotive industry as well as the government, as the sector is a significant contributor to the country's economy.

Although the government is trying its best to increase the foreign exchange reserves and has adopted strict measures in the mini-budget to please the International Monetary Fund (IMF) and get the IMF programme running, however, the staff-level agreement still seems delayed, which resulted in no significant improvement in the foreign exchange reserves.

Looking at the hardships in the import of raw materials, the situation remains uncertain, and the industry is hoping for a swift resolution to the issues being faced.

The temporary shutdown of Sazgar four-wheeler car plant is just one example of the challenges being faced by the Pakistani auto manufacturing industry.