Honda Atlas Cars Pakistan Ltd has introduced the longest plant shutdown to date within the present financial disaster amongst the nation’s automakers, that are struggling to acquire uncooked supplies due to import difficulties.
The firm, a unit of Japanese automotive big Honda Motor Co Ltd , stated its plant would shut from March 9, 2023, to March 31, 2023.
“The company is not in a position to continue with its production,” it stated in a discover to the Pakistan Stock Exchange (PSX), explaining its provide chain had been “severely disrupted.”
Other listed-automakers, comparable to Indus Motor Company Limited (INDU) and Pak Suzuki Motor Company (PSMC), have additionally been pressured to halt production through the previous three quarters due to Pakistan’s financial difficulties, which have seen central financial institution overseas alternate reserves drop to a stage barely ready to cowl 4 weeks of imports.
As a end result, letters of credit score (LC), used for imports, are dealing with delays whereas being processed and precedence is being given to important objects comparable to meals and drugs.
Pakistan is at the moment in talks with the International Monetary Fund (IMF) to unlock the subsequent tranche of $1.1 billion of a $6.5 billion bailout agreed in 2019.
“It is worrying because shutdowns not just impact corporate profitability but unemployment as well. The longer these shutdowns continue, it would test the companies’ ability to maintain staff strength,” says Fahad Rauf, head of research at Ismail Iqbal Securities, a local brokerage firm.
Rauf adds that the situation is not likely to improve any time soon for low priority sectors, such as automobiles, in light of LC constraints.
“Pakistan has limited dollars and until reserves improve to at least two months’ worth of import cover, import restrictions would likely continue.”
Other manufacturing halts within the sector have been between two and 16 days.
