Unable to import parts, Suzuki shuts two-wheeler, car plants in Pakistan

State Bank of Pakistan has imposed several rules regarding import of parts as well as auto loans within the country, slowing down auto financing

Pak Suzuki Motors announced that it will be closing its two- and four-wheeler plants between June 22 to July 8 due to shortage of accessories after the central bank imposed stricter import regulations.

The closure of plants was announced through a company filing on Pakistan’s stock exchange. According to the filing, the company stated that a mechanism introduced in May 2022 by the State Bank of Pakistan (SBP) requiring companies to take approval to import completely knocked-down kits had adversely affected the clearance of consignments and therefore the company’s inventory. This led to a shortage of parts and accessories resulting in the temporary closure of plants.

 

This is not the first time the company has closed plants, Pak Suzuki had shut its four-wheeler plant for 75 days from August 2022 till June 19.

According to the company’s financial report for the first quarter that ended in March 2023, the chairman, Kinji Saito stated in their director’s note that along with the bank’s policy on imports, the country’s ongoing economic crisis and falling of forex reserves have all negatively impacted the automobile sector.

The report added that net sales revenue fell by 54 per cent, from Pakistani Rupee (PKR) 47,736 million (Jan-Mar 2022) to PKR 21,839 million (Jan-March 2023).

According to a report by the Dawn, SBP’s policy also adversely affected the import of completely knocked-down kits by local assemblers, which fell by 54 per cent to $712 million in between April 2022 -February 2023 from $1.558 billion in the same period last financial year.

The report adds that outstanding auto loans in the country have increased from PKR 300 billion in May to Rs 309 billion in April, a 2.8 per cent increase. In June this figure reached PKR 368 billion as the central bank increased its interest rate to 21 per cent in March (earlier it was at seven per cent) to lower the demand for four-wheelers and slow down auto financing. As a result, auto sales have gone down and plants are being temporarily closed.

SBP has also imposed other restrictions such as limiting auto loans to PKR 3 million and reducing the repayment period of such loans.

However, Kinji Saito hopes that the government of Pakistan will relax these import restrictions and reduce tax & duties to support the automobile industry.