IMC chief says Toyota Pakistan resists layoffs amid production cut, import surge

KARACHI: Indus Motor Company (IMC), the maker of Toyota cars in Pakistan, said Wednesday it had not gone for any layoffs despite a 55 percent reduction in production due to weak demand and supply-side challenges.

Ali Asghar Jamali told a group of journalists that the automobile sector faced major challenges including rapid price escalation, expensive auto financing, higher taxes, and deteriorating macroeconomic conditions.

"Despite uncertainty regarding supply-side recovery, we have not opted for any layoffs which shows our commitment to the country and the wellbeing of our employees," he said.

Jamali added that IMC faced a 58 percent decline in its volumetric sales from January to June 2023 alone, but the company, instead of layoffs, was moving for other cost-cutting methods including budget decreases on various activities and reducing energy cost.

Thse local auto industry has been facing the issue of letters of credit (LCs) for quite some time, making it difficult for the industry to meet its production targets, which in turn is badly affecting sales.

Besides, he added, the import of used cars is gaining momentum, severely impacting the already affected local auto industry, as total used car imports are more than the production of some original equipment manufacturers (OEMs).

Jamali said over 6,000 used cars were imported in the financial year 2022-23, with more than 1,800 units being imported only in May and June this year.

"In the presence of minimum foreign exchange reserves held by SBP (State Bank of Pakistan), the government should refrain from permitting the policy of importing of used cars and instead support the local auto industry, which is producing cars locally."

He added that the industrial growth of the auto industry is essentially linked with a properly designed planned import policy and the growth of the local auto industry can never be achieved if the import of used cars is freely allowed by the government.

"This issue of used car imports is also nullifying the plausible localization achieved by the local auto industry, in terms of parts and also future localization plans."

Jamali said since the last increase in the prices of cars, there has been an increase of at least 10 percent in the dollar value. "Manufatureres will have to increase the prices of vehicles."

Jamali said that Pakistan is one of the worst victims of climate change and needs strategic measures on every front to address these challenges and according to the Global Carbon Budget 2022, annual CO2 emissions in the country stood at 229.51 million tons in 2021, which was 9 percent higher than 210.38 million tons in 2020.

"Hybrid electric vehicles (HEVs) are the most sustainable solution to the country's economic problems, as it would help achieve macroeconomic goals, employment generation, exports boost, and imports reduction as well," he opined.

Jamali said the HEVs are the most logical option to reduce carbon dioxide emissions in fossil-fuel-reliant countries like Pakistan and India, which have 62 percent and 75 percent share of fossil fuel in their energy mix respectively.

"Toyota has made an investment of $100 million to produce HEV vehicles in Pakistan and Toyota Cross, Pakistan's first locally manufactured HEV SUV is to be launched soon."

H said the adoption of hybrid technology will also result in the reduction of import bill, as 30 thousand units of HEVs will save around $37 million per annum.

Responding to a question, Jamali said new entrants in the market with strong investors would survive but those companies that relied on bank finances would have to face difficulties, as the interest rate was so high.

Due to higher interest rates, people were putting their money in the banks and stocks as well and property businesses were not performing well.

Talking about electric vehicles (EVs), Jamali said they reduce carbon emissions, but their prices were high besides a lack of infrastructure. "We will move towards EVs when we have proper infrastructure and policies in place."