KARACHI: Pak Suzuki Motor Company Ltd has announced to keep its motorcycle and four-wheeler plants closed from June 22 to July 8.

In a stock filing on Monday, the company said it was suspending production due to a shortage of parts and accessories owing to a mechanism introduced in May 2022 by the State Bank of Pakistan for taking prior approval for the import of completely knocked-down kits, which had adversely affected the clearance of consignments, thus affecting inventory levels.

Pak Suzuki kept its four-wheeler plant shut for over 75 days from August 2022 till June 19.

The company sold 2,958 vehicles in May 2023 compared to 1,474 units in April 2023. However, sales recorded a steep fall of 54pc to 62,354 units in 11MFY23 from 134,270 units in the same period last fiscal year.

Auto financing falls by Rs68bn in 11 months

The SBP’s curb on opening fresh LCs had adversely affected the arrival of completely knocked-down kits being imported by local assemblers, which fell by 54pc to $712 million in 11MFY23 from $1.558 billion in the same period last fiscal year.

Auto financing

The amount of outstanding auto loans continued its downward trajectory for the 11th consecutive month, plunging by Rs9bn, or 2.8pc, to Rs300bn in May from Rs309bn in April.

By taking the figure of Rs368bn at the end of June, the total decline in auto financing to date stands at Rs68bn, as per data released by the SBP.

The increase in the interest rate to 21pc from 7pc in March, followed by various measures by the central bank to slow down auto financing and demand for four-wheelers, is now finally paying off.

As a result of shrinking sales, car assemblers resorted to plant shutdowns, resulting in heavy unemployment of people, both directly and indirectly, especially in the vending units.

The SBP imposed various restrictions, like an upper limit of Rs3m on auto loans and a reduction in loan repayment tenor.

Tahir Abbas, Head of Research at Arif Habib Ltd, said high-interest rates, prices and production suspensions have adversely been affecting auto financing.

Mr Abbas observed that the current share of auto financing in total car sales ranges between 1-2pc, in contrast to 25-30pc during the period of high vehicle demand and low prices.

Given the current circumstances, car sales through bank financing are expected to remain depressed for the next six months, as no new auto loans are being offered, particularly due to the limited financing cap of Rs3m.

The revival of auto financing activities will largely depend on the resolution of political stability and the alleviation of the dollar crisis, while much will depend on the approval of the IMF loan.

Published in Dawn, June 20th, 2023