The well-known assembler of Toyota vehicles in Pakistan Indus Motor Company (IMC) has once again taken the decision to suspend its production, attributing the move to ongoing inventory shortages.
In a notice shared with the Pakistan Stock Exchange (PSX) on Monday, the automaker disclosed that this production halt would extend from October 17 to November 17, 2023.
This marks the ninth time this year that Indus Motor Company has been forced to halt production. In September, the company announced a complete shutdown of its plant, lasting from September 28 to October 9, also citing inventory issues.
Import restrictions
IMC's latest financial statements reveal a profit-after-tax (PAT) of Rs9.66 billion in the fiscal year 2023. However, this figure represents a decrease of nearly 39% compared to earnings of Rs15.8 billion in the same period of the previous year.
The downward trend in the automobile industry's performance can be attributed to various factors, including government policies and changing market dynamics.
Consumer woes
The Pakistani auto sector, which relies heavily on imports, has been severely impacted by the government's decision to curb imports and restrict the issuance of Letters of Credit (LCs).
Additionally, a combination of higher finance costs and a significant increase in car prices has led to a reduction in consumer demand.
In the first quarter of the fiscal year 2024, the auto industry saw sales of only 20,983 units, marking a substantial 40% decrease when compared to the same period the previous year.
Waqas Ghani, Deputy Head of Research at JS Research, noted, "The automobile industry in Pakistan is facing demand challenges, primarily driven by high prices, costly auto financing, and a surge in taxes, resulting in a year-on-year decline in sales."
Sunny Kumar, Deputy Head of Research at Topline Securities, echoed these concerns, stating, "Escalating car prices, expensive auto financing, and the low purchasing power of consumers are among the primary reasons for the decline in year-on-year sales."
As IMC's production shutdown continues, the Pakistani auto industry grapples with ongoing challenges that are reshaping the dynamics of the sector and impacting its key players. The situation raises questions about the sustainability and resilience of the industry in the face of a changing economic landscape and government policies.
