Raw material crisis forces Pak Suzuki to halt motorcycle production yet again

KARACHI: Pak Suzuki Motor Co (PSMC) has found itself in the throes of an acute crisis, grappling with a severe shortage of raw materials, leading the company to announce its third motorcycle production halt in the current fiscal year, as reported by The News on Saturday via a bourse filing.

The automobile manufacturer, in its notice to the Pakistan Stock Exchange (PSX), revealed that production would be suspended for a period of 12 days, commencing from September 1 to September 12, 2023. This comes hot on the heels of a recent shutdown from August 18 to 31, 2023, as reported by the company’s secretary. Prior to that, PSMC had faced closure from July 31 to August 15, 2023, due to inventory constraints.

While production may be on pause, the company affirmed that regular operations would continue at the vehicle manufacturing plant, according to the bourse filing.

The ongoing raw material crisis has been a persistent challenge for Pak Suzuki, stretching back to July of the previous year. The primary cause has been difficulties in importing vital components, exacerbated by the country’s dwindling foreign exchange reserves.

Sunny Kumar, an analyst at Topline Securities, noted, “PSMC produced 19,293 units with capacity utilization of 26% in 1H2023 compared to 76,325 units produced with capacity utilization of 102% in 1H2022.” Despite these setbacks, the company's management anticipates economic recovery in FY24, spurred by agricultural output growth and the easing of import restrictions, along with an expected uptick in manufacturing and construction activity.

Pak Suzuki's situation is not unique, mirroring challenges faced by other prominent automakers in Pakistan, including Honda Atlas and the Indus Motor Company, the local manufacturer of Toyota vehicles. All these companies have been forced to implement intermittent production stoppages due to the persistent raw material shortage. This shortage has also affected the automobile parts industry, causing disruptions in production.

In a parallel development, Agriauto Industries Limited, a notable automotive parts manufacturer, recently announced a partial plant closure in September due to decreased production. Additionally, Agriauto Stamping Company Pvt Ltd, a subsidiary of Agriauto Industries, is set to undergo a partial shutdown during the same period, as confirmed by the company secretary.

The announcement of Pak Suzuki’s latest production halt has raised concerns among employees, stakeholders, and the general public. The motorcycle plant, a significant division within the company, plays a vital role in providing employment in the country. Experts predict that the closure will not only impact the company's workforce but also have a broader economic ripple effect.

An industry observer highlighted that the suspension of motorcycle production underscores the persistent challenges faced by Pakistan’s automotive industry. The expert stressed the importance of coordinated efforts between stakeholders and government bodies to address the root causes of raw material shortages and prevent further disruptions.

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