Pak Suzuki closes car, and bike factories over shortage of parts

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The motorcycle and four-wheeler manufacturing facilities of Pak Suzuki Motor Company Ltd will be closed from 22 June to 8 July.

The State Bank of Pakistan introduced a mechanism in May 2022 for obtaining prior approval for the import of completely knocked-down kits.

This mechanism hurt the clearance of consignments, which in turn hurt inventory levels. As a result, the company said it was suspending production due to a shortage of parts and accessories.

From August 2022 to June 19, Pak Suzuki closed its four-wheeler manufacturing facility for more than 75 days.

In May 2023, the company sold 2,958 vehicles, up from 1,474 in April 2023. Sales, nevertheless, fell sharply by 54 percent to 62,354 units in 11MFY23 from 134,270 units in the same period the year before.

Completely knocked-down kits imported by local assemblers decreased by 54% to $712 million in 11MFY23 from $1.558 billion in the same time last fiscal year due to the SBP’s ban on opening new LCs.

For the eleventh straight month, the total amount of outstanding vehicle loans decreased, falling by Rs9 billion, or 2.8 percent, to Rs300 billion in May from Rs309 billion in April.

According to data provided by the SBP, the reduction in vehicle finance as of June 31 stood at Rs368 billion, or Rs68 billion overall.

The central bank’s efforts to slow down the demand for four-wheelers and vehicle financing after raising the interest rate from 7 to 21 percent in March and implementing further steps to do so are now beginning to bear fruit.

Reduced sales forced vehicle manufacturers to shut down their plants, which led to widespread direct and indirect unemployment, particularly in the vending units.

The SBP set several restrictions, including an Rs3 million maximum credit amount for auto loans and a shorter loan repayment term.