Honda Atlas plant set to restart after two months

KARACHI: Honda Atlas Cars (Pakistan) Limited on Monday said it was working to resume production activities in coming weeks after an improvement in accessibility of trade finance facilities for the supply chain.

The assembler of Honda-brand vehicles has been on a production break for more than two months amid an economic downturn in the country. With low foreign exchange reserves of Pakistan, the government resorted to some stringent measures, including restrictions on letters of credit (LCs) for import of CKD (completely knocked down) and raw materials imported by the auto industry.

Honda shared the latest development of resuming operations soon through a notice to Pakistan Stock Exchange. “With the consistent efforts of the company and slight improvement in accessibility of trade finance facilities for the supply chain, the company is now preparing to resume its production in the weeks ahead, with the hope to increase the same gradually,” read the notice.

Earlier this year, Honda announced suspension of production activities from March 9, 2023, which the company has continued till so far. As per the previous notice, the company was to keep its operations shut till May 15, but the Monday’s notice showed it would continue the halt for some more days.

The company has cited the country’s economic conditions, restriction of LCs for import of CKD kits and raw materials, and a halt in foreign payments as some of the key reasons for its production closure in recent months.

The auto industry is facing a huge setback amid non-production days, reduced consumer affordability on the back of higher interest rates and vehicles prices, rupee devaluation, and escalating petrol prices. The plants shutdowns have also resulted in layoffs in the industry.

According to latest data released by Pakistan Automotive Manufacturers Association, passenger car sales fell 85 percent to 2,844 units in April 2023, against 18,626 units recorded in April 2022. In the first ten months of FY23, a total of 88,620 units have been sold, down 54 percent against 191.238 units sold during the same period in FY22.

Honda Atlas Cars recorded a decline of 75 percent month-on-month (MoM) to 207 units in April 2023, led by a decline in sales of City and Civic by 74 percent MoM. Similarly, Pak Suzuki also posted a decline of 74 percent MoM to 1,474 units.

The country’s economy is reeling amid a severe political turmoil, while the government has been struggling to win an International Monetary Fund deal despite taking some harsh measures in recent months to amuse the lender of the last resort. With all this, it’s hard to predict an improvement in car sales in the foreseeable future.