Suzuki: Automobiles company, Suzuki told the Pakistan Stock Exchange that it will stop making cars from January 2 to 6. This is the sixth time this fiscal year that Suzuki will not be making anything. But this will be the first time that Suzuki stops production at both its car and motorcycle plants.
Suzuki says that the State Bank’s restrictions on importing completely knocked-down (CKD) kits have made it hard to keep enough inventory on hand. Prior to those dates, production had been halted from August 18 to August 19, August 22 to August 26, August 29 to August 31, October 19 to October 21, and October 24 to October 26.
It is a very tough time for Pak Suzuki
“Overall, Suzuki will have taken twenty-one days off from making cars and five days off from making motorcycles.
It is a very tough time for Pak Suzuki because there are limits on what he can import, and he doesn’t know how long these limits will last.
Shafiq Ahmed Shaikh, Head of Public Relations and Official Spokesperson at Pak Suzuki Motor Company Limited, says that things like detention, demurrages, and KIBOR+3% are really hurting our industry.
“Both our dealers and our suppliers are very upset about the lack of sales and production.Shaikh went on to say, “I’d like to ask the government of Pakistan to talk with the industry right away to find a solution.”
The threat of the State Bank hanging over the auto industry
The announcement from Suzuki comes exactly one week after Toyota Indus Motor said they would stop making cars for the rest of the year for the same reason. In the same way, the State Bank’s restrictions on imports have caused Honda to stop making things for 15 days this fiscal year.
But they are not wrong to blame them. In May, the State Bank sent out a circular saying that it now had administrative control over CKD car parts coming into the country.
The State Bank’s announcement about CKD imports came just one day after the government banned the import of luxury goods in an effort to stop the loss of foreign currency. Even though cars were not on the list of “luxury” items that the government banned, the State Bank kept an eye on them in a more subtle way.
Basically, the State Bank told Pakistani car companies that they needed to get permission before doing any dollar transactions for the import of CKD kits. This meant that people in the country who put together cars will now need permission from the State Bank to do so.
With this permission, the State Bank could now keep track of how many cars were being brought in and how much money was leaving the country. This is now the club that the State Bank uses against the auto industry to try to save Pakistan’s current account position, which is getting worse.
Measures taken by the State Bank are linked to Suzuki’s worst start in two years
Because of what the State Bank did, Suzuki’s fiscal year got off to the worst start it has had since FY 2020-21. The just-in-time model is used by most of Pakistan’s auto industry, including Suzuki. According to the model, Suzuki doesn’t start making cars until they have been ordered. Because of how this model works, lead times are pretty long. Lead times get even longer when it’s hard to get the letters of credit needed to import the CKD kits used to make the cars.
Because of this, Suzuki is able to take lower orders all at once because it can’t handle the same amount of volume it did in previous years. The total number of cars and motorcycles sold by Suzuki in the last five months is 24% less than the same time last year. But, just like when they weren’t making anything, Suzuki isn’t the only company that’s having trouble with demand destruction right now. The notice comes two weeks after Millat Tractors decided to permanently switch to a four-day work week due to low demand.
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