KARACHI: Restrictions on the opening of letters of credit for parts import amid exchange rate volatility have caused unrest in the auto sector and one assembler has hinted at a production shutdown besides refunding bookings to the customers perturbed over late delivery issues.

While some assemblers have also opted for non-production days (NPDs) this month and in August because of the uncertain economic situation.

Assemblers have been facing severe problems in timely handing over the keys to their buyers due to delays in the arrival of imported parts and looming price increases due to rupee depreciation.

An official in Indus Motor Company (IMC) told Dawn that the production remained suspended from July 1 to 17 due to the non-arrival of parts and the long eid holidays.

Hold Rs189bn booking deposits of customers

The company, he added, is planning NPDs from Aug 1-14 depending on the quota being negotiated with the State Bank of Pakistan for the imports of completely knocked-down (CKD) kits.

He said the company is considering paying back the amount to the buyers who had booked vehicles due to the company’s inability to hand over the vehicles on time or would ask the customers to wait for three more months and also pay the price difference due to change in rupee-dollar parity.

IMC has already suspended the booking of vehicles from May 18 due to a volatile exchange rate and the non-opening of LCs.

Last week, the Public Accounts Committee (PAC) was informed that Rs189 billion was deposited by customers in advance with 10 auto assemblers, and IMC tops with Rs99.2bn followed by Rs35.4bn by Pak Suzuki Motor Company Ltd (PSMCL), Rs21.8bn by Honda Atlas Cars (HACL), Rs11bn by Master Changan Motors, Rs10.6bn by Kia Lucky Motor Corporation Ltd, Rs6.9bn by Hyundai Nishat Motors, Rs1.7bn by Al Haj Motors, Rs1.6bn by Ghandhara Nissan Motors, Rs0.7bn by Sazgar Engineering Works and Rs0.3bn by Regal Automobile Industries.

An automaker, who attended the PAC meeting, said the government had asked the assemblers if they could not deliver the vehicles on time then why they are taking a huge number of bookings from the customers.

On the contrary, the companies had been mercilessly passing on the impact of the rising dollar against the rupee. The delivery time of vehicles has been ranging from two months to 10 months in case a buyer books the vehicles whose bookings are open.

An official in Kia Lucky Motor Corporation Ltd (LMCL), who asked not to be named, said the company had opted for three to four NPDs in the current month besides shutting down the plant on Saturdays. He said the company plans to operate on a single shift in case the LC restrictions were not lifted.

An executive in Honda Atlas Cars Ltd said the company did one or two days of NPDs in the current month due to Eid holidays. The company is not planning any future NPDs or considering any booking closure. However, he added that the smooth flow of CKD kits is still an issue depending on the quota by the SBP.

Some quality issues are also going on. For instance, PSMCL’s website flashes a public notice regarding the service campaign of Alto’s fuel filler neck which was manufactured from 2019 to 2021. The company suspects that the neck fuel filler could burst with time and in the worst condition, it may be perforated.

Published in Dawn, July 26th, 2022