The assembler of Honda automobiles in Pakistan, Honda Atlas Cars, stated on Wednesday that the company will not be able to continue with its production and will shut its plant for the remainder of the month. The automaker sent a notice to the Pakistan Stock Exchange, stating that its supply chain has been “severely disrupted”.
“Considering the current economic situation of Pakistan whereby the government resorted to stringent measures including restricting the opening of LCs [letter of credits] for import of CKD [completely knocked-down] kits, raw materials and halting foreign payments, the company’s supply chain has also been severely disrupted by such measures,” it stated.
Read More: China Waging Internet War Against Taiwan? Taipei Suspects Chinese Ships Cut Islands’ Internet Cables
The company added that it is no longer in a position to continue its production and will shut the plant from March 9 to 31.
Other four- and two-wheeler companies such as Toyota Motors, Pakistan Suzuki, Indus Motor Company also shut their plants previously, which impacted their sales. Fahad Rauf, head of research at Ismail Iqbal Securities, a local brokerage firm, said that these shutdowns do not just impact corporate profitability but unemployment too. “The longer these shutdowns continue, it would test the companies’ ability to maintain staff strength,” said Rauf. Other manufacturing halts in the sector have been between two and 16 days.
Apart from the impact on production activity, the increase in price of CKD has also put a dent on the already diminishing purchasing power of the Pakistani people.
Read More: China’s President Xi Jinping Calls For Enhancing Strategic Capabilities To Win Wars
Pakistan is reeling under the impact of high inflation rates and high borrowing costs, which has eroded demands and plunged the rupee. Import of key automobile parts have become quite expensive.
The Pakistani auto sector has been engulfed in a crisis after another, with a number of automakers announcing complete or partial shutdowns in recent months. Reduced demand, companies’ inability to maintain inventory as they struggle to secure LCs, used for imports, have led to these shutdowns. The coalition government introduced import restrictions in order to control the trade deficit.
Pakistan is currently in talks with the International Monetary Fund (IMF) to unlock the next tranche of $1.1 billion of a $6.5 billion bailout agreed in 2019.
(With Reuters inputs)
