Honda Atlas Cars Pakistan Ltd has announced the longest ever plant shutdown in the current economic crisis amid the country’s automakers, who are struggling to get raw materials due to import difficulties.
The company, a unit of Japanese car giant Honda Motor Co Ltd, said its plant will remain closed from March 9, 2023, to March 31, 2023.
“The company is not in a position to continue its production,” it said in a notice to the Pakistan Stock Exchange (PSX), adding that its supply chain had been “severely disrupted”.
Other listed-automakers such as Indus Motor Company Limited (INDU) and Pak Suzuki Motor Company (PSMC) have also been forced to halt production during the past three quarters due to Pakistan’s economic difficulties, leading to a decline in central bank foreign exchange reserves. has been seen. to a level barely able to cover four weeks’ worth of imports.
As a result, letters of credit (LCs) used for imports are facing delays in getting processed and priority is being given to essential items like food and medicine.
Pakistan is currently in talks with the International Monetary Fund (IMF) to unlock the next tranche of $1.1 billion out of the $6.5 billion bailout agreed in 2019.
“This is worrying as the shutdown not only affects corporate profitability but also unemployment. “The longer these shutdowns continue, it will test the ability of companies to retain workforce,” says Fahad Rauf, head of research at Ismail Iqbal Securities, a local brokerage firm.
Rauf adds that the situation is unlikely to improve soon for low-priority sectors such as automobiles in light of LC constraints.
“Pakistan has limited dollars and the import ban will continue till the import cover of at least two months improves.”
Other manufacturing halts in the sector have been between two and 16 days.