The problems for the auto industry continue as Indus Motor Company (IMC) has announced another plant shutdown. The combination of LC issues and low demand has forced the company to report another plant closure for two weeks.
Notification by IMC
In a notification to the Pakistan Stock Exchange (PSX), the company stated per Sections 96 and 131 of the Securities Act 2015 and Clause 5.6.1 (a) of PSX Regulations, IMC hereby conveys the following information:
- In the fiscal year 2022-23, the demand for the auto sector has continuously declined due to the challenging economic environment, low consumer purchasing power, and increased duties and taxes by the Federal Government.
- While considering the low demand and inventory levels, the company has decided to close its production plant from Friday, August 25, 2023, to Wednesday, September 6, 2023 (both days inclusive).
You may please inform the TRE Certificate holders of the Exchange accordingly. Commenting on the situation, economist Abdul Rehman tweeted that this industry should seriously work on developing some sort of expert business for long-term sustainable operations.
Problems for auto assemblers continue‼️
Combination of LC issues (even today) and low demand means another 2 week closure for Toyota.
This industry should seriously work on developing some sort of export business for long term sustainable operations. pic.twitter.com/td56I5w67K
— Abdul Rehman (@AbdulRehman0292) August 24, 2023
Previous Toyota Plant Shutdowns
Earlier, the company announced a closure of its production plant for two weeks, from July 21, 2023, to August 3, 2023. The decision to another plant shutdown came as the IMC grapples with significant challenges in importing raw materials, leading to disruptions in its supply chain.
Other Shutdowns
Indus Motors is not alone in facing the brunt of raw material scarcity. Other major automotive manufacturers, including Pak Suzuki Motors and Honda Cars, have also experienced shutdown days in recent months due to similar issues. The automotive sector, along with other industries reliant on imported raw materials, has been grappling with these challenges due to a shortage of foreign exchange reserves in Pakistan.
As a significant player in Pakistan’s automobile industry, Indus Motors has invested $100 million in local production of hybrid electric vehicles (HEVs). The company has played a crucial role in establishing the local automotive ecosystem, with over 50 part manufacturers contributing to the value chain by producing parts worth over Rs. 250 million every working day.
Exporting car parts! Pakistan is still importing carbonated water for drinks and biscuits too, how can then such economy be expected to export something that OEC is labeling as a highly complex product? It is high time Pakistanis realised that they are a primary economy and must avoid living off other peoples money, in other words, refrain buying technical or secondary products using external financing.
PS Toyota and other car companies are skilled than this economist to realise their situations and therefore, are in a better position to fend for themselves in a more farsighted manner.
I agree with Economist Abdul Rehman. Export side of things need to be seriously explored by these companies. The original three have been around for over three decades as assemblers in the local market. And we are to believe that in all that time they never ONCE had the right conditions to explore exports?
“As a significant player in Pakistan’s automobile industry, Indus Motors has invested $100 million in local production of hybrid electric vehicles (HEVs).”
Yes, and it was still beaten very thoroughly by Haval with their H6 hybrid; which will still be better and more well equipped and much better priced than the stripped-out hybrid Indus Toyota will introduce into Pakistan. How can we be sure of that? Look at the new Honda H-RV. It is the most basic stripped-down version of the small SUV you can find. The irony is the ‘S’ variant that is “top of the line” in Pakistan is usually the LOWEST variant of the H-RV in other markets. So, Toyota will be doing more of the same and offer as little as they can get away with. It’s the way they have always operated.
“The company has played a crucial role in establishing the local automotive ecosystem, with over 50 part manufacturers contributing to the value chain by producing parts worth over Rs. 250 million every working day.”
250 million PKR translates to around 825 thousand USD. That means they do less than a million USD worth of business daily as you claim. But on the flip side these companies import hundreds of millions of USD worth of parts and raw materials each year. So, is this local business, selling locally only and also importing raw material while exporting nothing, good for the economy in the long run and in the true sense? Or should we be happy that Indus motors can now be considered carpet exporters while being a car company because they are exporting carpets to Egypt instead of actual car parts?
They should take to heart that old saying: You reap what you sow. These companies created this circumstance for themselves. If they had any forethought and had done things right instead of always opting to take the easy way out by gaming the system, all this could have been easily avoided. Three decades is long enough don’t you think.
(And please no alibis that “they did not have the right power”. If every time these guys don’t like any policy, they can easily bring in the Japanese ambassador into the mix to get their way; they have the necessary power. If they had used that power the right way, all this could have been easily avoided don’t you think?