Indus Motors Company (IMC) the maker of Toyota cars in Pakistan has announced that they are to shut down its production plant in the country from December 20-30, citing a delay in import approvals from the State Bank of Pakistan (SBP). Indus Motors sent a letter addressed to the general manager of the Pakistan Stock Exchange, the IMC management said that the central bank had introduced a new mechanism for obtaining prior approval for the import of “CKD kits and components of passenger cars (HS Code 8703 Category)” for the auto sector.
“The aforesaid delay in the approvals for the company and vendors has created hurdles in the import and clearance of consignments for raw materials and components of the company. This has resulted in insufficient inventory levels and consequently has created an adverse impact on the supply chain and production activities,”
Pakistan’s auto industry is already highly dependent on imports and has been caught in the midst of an exchange-rate crisis, as the SBP, after unabated rupee depreciation, imposed restrictions on the opening of Letters of Credit (LCs).
Officials of IMC in a corporate briefing session said import restrictions imposed by the central bank and ongoing rupee depreciation are denting the country’s auto sector.
Officials at the time said that the industry is bearing the burden of escalating production costs on account of rupee depreciation, while demand has declined due to the economic downturn amid high-interest rates and augmented duties and taxes on vehicles.
The coalition government, since reigning into power, has been trying to curb imports in the face of fast-depleting foreign reserves, a declining currency, and a widening current account deficit, because of which the rupee has lost over 26% of its value this year.
The move has had a cascading effect on industries that rely on imports to complete finished goods as they say the central bank has delayed the clearance of letters of credit with banks facing a shortage of dollars, affecting their ability to import materials.
It should be noted that the IMC had announced a temporary shutdown of its production plant from September 1 to September 15 on insufficient inventory levels to maintain its production, as well as on account of a delay in approvals from the SBP for the import of CKD kits and components of passenger vehicles.
They said development activities for various new models were in the process across the industry. For new technology vehicles and parts development, the assemblers and vendors need to import machinery, molds, tools, and fixtures. For the smooth development of local parts, the trial activities are to be conducted months before the start of mass production.