PSMC halts production amid inventory crunch

KARACHI: Pak Suzuki Motor Company (PSMC) said on Wednesday it would temporarily halt production at its automobile plant for the second time in a week due to a shortage of inventory.

The company, a subsidiary of Japan's Suzuki Motor Corp, said in a notice to the Pakistan Stock Exchange that it would shut down the plant from Nov. 9 to Nov. 14, while its motorcycle plant would remain operative.

PSMC has announced over a dozen shutdowns this year, citing a lack of raw material and low demand from consumers. Last month, it decided to buy back all its shares and delist from the stock exchange, after reporting losses of Rs9.68 billion in the first half of the fiscal year 2022-23.

The auto industry, which relies heavily on imports for raw materials and parts, is facing a crisis as the import restrictions and the rising cost of borrowing have led to a severe shortage of inventory and a slump in demand, forcing several automakers to shut down their plants temporarily.

A day earlier Honda Atlas Cars (Pakistan) announced that it is extending plant shutdown due to supply chain disruptions. HACPL, a subsidiary of Honda Motor Co., Ltd. of Japan, said that it has decided to further extend the shutdown of its plant from Nov. 8 to Nov. 9, after initially suspending operations from Oct. 24 to Oct. 31 and then to Nov. 7.

Other automakers, such as Indus Motor Company, have also suspended their operations intermittently in recent weeks. The auto sector's woes are partly a result of the government's decision to curb imports and restrict the issuance of letters of credit to ease pressure on the country's foreign exchange reserves and narrow its current account deficit.

Analysts said the government measures have made it difficult for automakers to import raw materials and parts, which account for more than 70 percent of their production costs. The auto sector is also facing a decline in demand from consumers, who are deterred by the high interest rates and the steep increase in car prices. The higher borrowing costs have reduced the availability of auto financing, which accounts for more than 50 percent of car sales in Pakistan, according to analysts.