Honda Atlas Cars Pakistan Ltd has introduced the longest plant shutdown to this point within the present financial disaster amongst the nation’s automakers, that are struggling to acquire uncooked supplies resulting from import difficulties.
The firm, a unit of Japanese automotive large Honda Motor Co Ltd , mentioned 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 mentioned in a discover to the Pakistan Stock Exchange (PSX), explaining its provide chain had been “severely disrupted.”
Other listed-automakers, equivalent to Indus Motor Company Limited (INDU) and Pak Suzuki Motor Company (PSMC), have additionally been compelled to halt manufacturing through the previous three quarters resulting from Pakistan’s financial difficulties, which have seen central financial institution international change reserves drop to a degree barely in a position to cowl 4 weeks of imports.
As a consequence, letters of credit score (LC), used for imports, are dealing with delays whereas being processed and precedence is being given to important objects equivalent to meals and medication.
Pakistan is at present in talks with the International Monetary Fund (IMF) to unlock the following 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.
Source: www.thehindu.com