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Amidst supply chain disruptions Honda announces plant shutdown in Pakistan

In a notice issued to the Pakistan Stock Exchange, the car manufacturer stated that the decision was made since the company's supply chain has been "severely disrupted”.

On Wednesday, March 8, the assembler of Honda automobiles in Pakistan, Honda Atlas Cars announced a complete shutdown of its plant for the month of March due to supply chain disruptions. 

In a notice issued to the Pakistan Stock Exchange, the car manufacturer stated that the decision was made since the company’s supply chain has been “severely disrupted”.

“Considering the current economic situation of Pakistan whereby the government resorted to stringent measures including restricting the opening of LCs (letter of credits) for import of CKD (completely knocked-down) kits, raw materials and halting foreign payments, the company’s supply chain has also been severely disrupted by such measures,” Honda Atlas Cars stated.

Since the company is not in a position to continue with its production, it will ultimately be forced to shut down its facility from March 9 to March 31.

It is notable that several companies in various sectors have stopped production in a cash-strapped Pakistan as they ran out of raw materials or foreign exchange and in some cases both. In February this year, Pak Suzuki Motor Company (PSMC), another prominent car manufacturer had announced to shut down its automobile plant from February 13 to February 17 due to a shortage of inventory.

Suzuki motorcycles, sedans, pickup trucks, vans, 4x4s, and other vehicles are locally assembled, produced, and marketed by PMSC along with any necessary replacement parts.

In January, PSMC announced that its plant would be temporarily shut down from January 2 to January 6 and again from January 16 to January 20 due to inventory shortages.

PSMC had to further extend the shut down till February 21. Due to restrictions placed by the State Bank of Pakistan on Letters of Credit (LCs) opening as a result of the continuing depreciation of the rupee, Pakistan’s automobile sector, which is heavily dependent on imports, is currently experiencing a crisis. As Pakistan’s reserves have drastically depleted, industries are experiencing operational challenges.

In December last year, Indus Motor Cars (IMC), the makers of Toyota vehicles in Pakistan had announced to halt production temporarily owing to a delay in import approvals from the State Bank of Pakistan (SBP).

Logistic services suffer amidst forex crisis in Pakistan

As Pakistan’s shattered economy struggles with a foreign exchange crisis, logistics companies serving the nation are being compelled to restrict their services.

Express logistics giant DHL said it was compelled to cease operations in Pakistan as of March 15 for locally billed imports and limit handling outbound shipments to a maximum of 70 kg until further notice due to the significant difficulty in completing currency transactions.

DHL claims that the restrictions have made it incredibly challenging for them to continue offering the full range of product offerings for shipments leaving Pakistan.

On February 27, Virgin Atlantic, a UK-based airline announced that it is suspending its connections between London Heathrow and Pakistan as part of a revised flying programme for 2023.

Lahore flights from London Heathrow (LHR/EGLL) will terminate on April 30 while Islamabad flights will end on July 9.

Skyrocketing car prices 

In a country where even prices of essential food items like flour have witnessed a dramatic surge, rising prices of cars are not surprising at all. According to a recent report by Pakistan Business Forum (PBF), car costs in Pakistan have soared by a record-breaking 149%. According to PBF Vice President Ahmad Jawad, this increase is the result of the auto industry’s tendency to base prices on how the US dollar is performing against the Pakistani rupee.

China comes to Pakistan’s rescue

The country is still short of dollars to meet import and other foreign payment obligations. The foreign exchange reserves of the central bank currently total nearly $3.8 billion, hardly enough to meet a month’s worth of essential imports. However, China has stepped in to ‘rescue’ Pakistan as the Industrial and Commercial Bank of China (ICBC) loan inflow is expected to increase the State Bank of Pakistan’s foreign exchange reserves as ICBC has approved an extension of a $1.3 billion loan for the country.

Pakistan-IMF meeting over bail-out fails

The talks for a much-needed bailout package between International Monetary Fund (IMF) and Pakistan failed earlier this month, posing a serious question about the country’s ability to repay international loans. Pakistan is in talks with the IMF on a $1.1 billion funding round, which is part of a $6.5 billion bailout package signed in 2019. While an IMF team was in Pakistan to discuss the deal, the talks collapsed as they failed to reach a staff-level agreement within the stipulated time. Following this, Shehbaz Sharif-led ruling coalition decided to significantly increase tax rates to meet with IMF’s conditions. Adding more to the troubles of Pakistan, IMF recently added a new condition for the much-needed bailout. Reuters cited the resident representative of the IMF as saying that the international financing body had directed Pakistan to assure that its balance of payments deficit is completely covered for the fiscal year that ends in June.

Ayodhra Ram Mandir special coverage by OpIndia

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OpIndia Staff
OpIndia Staff
Staff reporter at OpIndia

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