Following Millat Tractor, the automaker declared that all of its manufacturing plants will be shuttered starting December 20 to December 30 as a result of the shortage of letters of credit (LCs) owing to a restriction on the import of auto parts.
“The State Bank of Pakistan has introduced a mechanism, via the Exchange Policy Department (EPD) circular number 09 of 2022 dated May 20, 2022, to obtain prior approval for the import of completely knocked down (CKD) Kits and components of passenger cars – harmonized system (HS) Code 8703 category – for the auto sector,” according to a notice sent to the Pakistan Stock Exchange (PSX) on Monday.
The auto giant claimed that the delay in the aforementioned approvals for the company and its suppliers has made it more difficult to import and clear shipments of the company’s raw materials and components.
According to Auto Analyst Arsalan Hanif, the SBP’s previous approval process is having an adverse effect on the expansion of the automotive industry and may even lead to job losses since original equipment manufacturers (OEMs) are now required to pay a markup for late deliveries.
Several other manufacturers are struggling with similar circumstances, and if this pattern continues, the company might prolong its closure due to the insufficient inventory to manufacture vehicles, Hanif concluded.
Demand for the company’s vehicles did not wane even when prices spiked and affected other market participants. However, this time, within the span of four days, a second company stopped operations. A fall in consumer purchasing power is another factor that has contributed to this sluggish trend in demand, in addition to import restrictions and rigorous LC conditions.
