Indus Motor to halt production for a month amid supply chain woes

KARACHI: Indus Motor Company (IMC), the assembler of Toyota vehicles in Pakistan, said on Monday it would suspend production for a month from October 17 due to inventory shortages caused by supply chain disruptions.

The company said in a notice to the Pakistan Stock Exchange (PSX) that it had decided to close its production plant based on the current level of inventory of manufactured vehicles and parts shortages.

“Based on current level of inventory of manufactured vehicles and parts shortages due to supply chain challenges, the company has decided to close its production plant from 17 October 2023 to 17 November 2023 (both days inclusive),” the company said. "In case of any change in plan, we will update accordingly."

This is the second time in less than a month and the ninth time this year that IMC has shut down its plant. The company had earlier suspended production from September 27 to October 9 for the same reasons.

IMC is not alone in facing the twin problems of raw material scarcity and low demand. Other major automakers such as Pak Suzuki Motors and Honda Cars have also announced multiple closures of their plants in recent months.

The country's auto sector, which relies heavily on imports, has been hit hard by the government's decision to curb imports on dollar shortages and depreciation of the rupee, which has made imports more expensive and pushed up car prices.

In the first quarter of the current fiscal year, Indus Motor sold 20,983 units, down 40 percent from the same period last year, according to data from the Pakistan Automotive Manufacturers Association (PAMA).

Total car sales clocked in at 16,021 units in July-September FY24 as compared to 28,571 in the same period last fiscal year, while September sales crawled up to 6,410 units from 5,909 units in August and 3,702 units in July.

Analysts said escalating car prices, expensive auto financing, and the low purchasing power of consumers are among the primary reasons for the decline in year-on-year sales and annual profits.

Indus Motor posted a profit-after-tax of Rs9.66 billion in the fiscal year ended June 30, 2023, down nearly 39 percent from Rs15.8 billion a year earlier, according to its latest financial statements.

"The automobile industry in Pakistan is facing demand challenges, primarily driven by high prices, costly auto financing, and a surge in taxes, resulting in a year-on-year decline in sales," analyst Waqas Ghani at JS Research said.