Pakistan Suzuki halts production, 30,000 workers lost their jobs

The Suzuki Motor Company Ltd (PSMC) has decided to keep its car and bike plants in Pakistan closed from June 22 to July 8 due to import restrictions and its impact on parts and accessories, In an official notice to the Pakistan Stock Exchange (PSX), the company cited a lack of inventory as the cause for the shutdown of its car and bike assembly plant. Because of a mechanism introduced in May last year by Pakistan's central bank, it said.The move by the Japanese auto major comes merely a week after it started operations at its four-wheeler unit in Pakistan that was shut for over 75 days, it said.

According to Geo news report,  auto is one of the sectors affected by current economic conditions in Pakistan as the importers have been struggling to get their letters of credit (LCs) issued amid the low foreign exchange reserves of the country. The forex reserves held by the State Bank of Pakistan are standing at $4 billion which can only cover a month’s imports of the country. The ongoing shortage of raw materials has plagued the company for a year. PSMC had recently kept its bike plant shut from May 23 to June 16. The automobile plant also remained closed at the start of the previous month. Other companies such as Indus Motor Company have also announced multiple shutdowns on import restrictions.

Amid an economic downturn in Pakistan and a decline in purchasing power on record inflation, car sales have drastically dropped in a year. In May 2023, car sales plunged by 80% year-on-year, according to Pakistan Automotive Manufacturers Association. In the 11 months of FY23, a total of 92,554 units have been sold, down 56% against 210,633 units sold during the same period in FY22. Back-to-back production shutdowns by companies in Pakistan have led to massive layoffs in the country. According to a statement by the Pakistan Association of Automotive Parts and Accessories Manufacturers, more than 25,000-30,000 workers in the auto sector have lost their jobs due to an unabated drop in annual sales.

As the government struggles to win an IMF deal before the current bailout programme ends on June 30, business confidence in the country has dropped 21 percentage points to -25% in March-April from -4% recorded in September-October 2022, according to the latest survey conducted by the Overseas Investors Chamber of Commerce and Industry. The three major threats to business growth identified in the survey were high inflation, high taxation, and devaluation, report said.