Honda Atlas Cars Pakistan (HACP) has decided to shut down its production plant for ten days on Friday, as its inventories reached 2000 units on plunging sales and increased prices due to imposition of higher tax rates and Rupee depreciation.
Indus Motor Company (IMC) which makes Toyota models, has decided to follow suit and stop its production for 8 days for a month; i.e. two days every week.
The previous week, Honda kept its plant closed. Pakistan Suzuki Motor Company spokesman claimed that Honda will make a decision regarding whether or not to reduce production in the next forthcoming days after analysing sales trend and flow of booking orders during the current month.
HACP and IMC executives claimed their decision to cut down production was based on the lack of sales in the first 10 days of the current month. A senior executive of Honda said “Our inventories from the last month and the first 10 days of July have grown rapidly because of steep increase in car prices after currency devaluation as well as imposition of Advance Customs Duty (ACD) on all our imports and Federal Excise Duty (FED) on assembled cars, leaving us with no option but to shut down the plant to cut production. If the present trend holds, we expect our sales to drop to less than 30,000 units this business year (April 2019-March 2020) from over 48,000 units last year,”
Furthermore regarding the 8 day production halt, an IMC official said “it is a very serious situation for the local car manufacturers who are piling up inventories,”
For the last three months, sales have declined as total car and light commercial vehicles (LCV) volume reduced by 5pc to 17,561 units in June from about a year ago. Generally, the car and LCV sales plunged by 7pc during the last fiscal year to 240,335 units compared to the previous year. The consequence of the imposition of 5pc ACD on raw material and parts used by local assemblers and further 2.5-7.5pc FED has caused a rapid decline in sales.
Sources at the industry expect a steep dive in sales at the end of this year. It should be noted that the industry was previously expecting an increase in sales by half a million by year 2022.