The auto industry in Pakistan is facing significant challenges as Indus Motor Company (IMC), the assembler of Toyota vehicles in the country, has announced its ninth production shutdown this year. IMC cited inventory shortages and ongoing supply chain challenges as the reasons behind the production halt.
IMC’s decision to suspend production will last for a month, from October 17 to November 17, 2023. This extended shutdown is a response to the current level of inventory shortages and difficulties in sourcing essential parts due to supply chain challenges. IMC noted that any changes to this plan will be updated accordingly.
This situation reflects the increasing difficulties faced by the automotive sector in Pakistan. During the first quarter of fiscal year 2024, Toyota sales in Pakistan dropped by a staggering 49.1 percent, with only 4,511 units sold compared to 8,868 units sold in the same period the previous year, as reported by the Pakistan Automotive Manufacturers Association (PAMA).
The Pakistani auto industry is highly reliant on imports, which has made it vulnerable to recent government policies designed to curb imports and restrict the issuance of Letters of Credit (LCs). These measures have further compounded the challenges faced by the industry.
In addition to import restrictions, the auto sector has been grappling with higher finance costs and a significant increase in car prices, resulting in reduced consumer demand. In the first quarter of fiscal year 2024, total sales for the sector stood at only 20,983 units, representing a 40% decrease compared to the same period the previous year.
IMC’s latest financial statements show a profit-after-tax (PAT) of Rs9.66 billion in fiscal year 2023, which is a decrease of nearly 39% compared to earnings of Rs15.8 billion in the previous year.
The combination of production disruptions, inventory problems, government policies, and economic factors has created a challenging environment for the auto industry in Pakistan. The sustainability and resilience of the sector in the face of these changes remain uncertain, raising questions about its future in the evolving economic landscape and government policies.