LAHORE: Toyota has notified the Pakistan Stock Exchange (PSX) that it will observe non-production days (NPD) from March 24 to March 27. The company has attributed the decision to its inability to access letters of credit needed to import the requisite materials to engage in production activities.
This is the second spell of NPDs that Toyota will observe in 2023. The company previously observed NPDs from February 1 to February 14 with the decision to observe a single shift from February 15 in perpetuity until further notice. The company has yet to withdraw the statement pertaining to its decision to a single shift, therefore, it is most likely that it will persist even when production resumes on March 27.
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Explaining the letter of credit and import conundrum
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The State Bank of Pakistan (SBP) announced EPD Circular Letter No. 20 of 2022 on December 22, 2022, as a substitution to its governance over the import of products under Chapters 84, 85, and certain items of Chapter 87. This new system empowered authorised dealers (banks) to validate all transactions for these imports, providing some solace to the ailing automotive industry that had been gravely impacted by the prior mechanism.
Authorised dealers were, however, instructed to prioritise essential imports over those aligned with conspicuous consumption, prompting concerns about the depth of relief the automotive industry would receive in the immediate future. Firms that were able to obtain raw materials from their foreign suppliers on usance letters of credit, or were able to meet their payment obligations outside of Pakistan were to also be given preference. The circular, however, explicitly created a hierarchy of imports which evidently has not benefited Toyota.
Industry wide woes
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Toyota’s decision comes a mere few days following Ghandhara Tyre & Rubber Company’ and Hinopak Motors’ decision to observe NPDs from March 24 to April 3 and March 24 to April 4 respectively.
Previously, Suzuki decided to halt motorcycle production for the remainder of March for the very same reasons. Previously Honda had announced to observe the industry’s longest spell of NPDs amidst the current crises from from March 9 to March 31. Ghandhara’s sister company Ghandhara Nissan has also observed NPDs from March 6 to March 10, with the decision to shift to a bi-weekly production schedule for the remainder of March. Agriauto Industries also announced a partial shutdown for the entirety of March last week, whilst Sazgar announced its first ever plant closure for its four wheel division from February 27 to March 4.
Suzuki itself had announced plant closures previously from January 2 to January 6, from January 9 to January 13, from January 16 to January 20, and from February 13 to February 21. Toyota too observed plant closures from February 1 to February 14 with the decision to shift to a single shift upon the resumption of regular production from February 15. Finally, Millat Tractors also observed a plant closure from January 6 January 15.
Source: https://t-tees.com
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