General Tyres Pakistan Has Shut Down Operations

General Tyres - A Major Tyre Manufacturer in Pakistan Has Stopped Manufacturing

Another bad news associated with the automobile industry. Ghandhara Tyre & Rubber Company Limited formerly known as General Tyre & Rubber (GTR) has paused manufacturing in Pakistan due to import restrictions and the worsening economic situation in the country. Recently, we have seen some automobile manufacturers observing non-production days as well.

In a notification, the company has announced to suspend production operations from 13-Feb-2023 to 17-Feb-2023. It is due to the shortage of raw materials, a result of import restrictions or the letter of credit issue in Pakistan (explained later in this blog).

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Situation

The shortage of foreign exchange is forcing the government to restrict imports in Pakistan. As a result, there have been many reports of raw material shortages in automobile, mobile, construction, food, energy, health, and many other industries.

In a recent development, the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) and the Pakistan Automotive Manufacturers Association (PAMA) sent a joint letter to the Governor State Bank of Pakistan (SBP). In the letter, they showed fear of the automobile industry’s extinction due to the restriction and lack of cooperation by banks. As per them, this situation is causing closures of factories and many assemblers are laying off their employees as well.

They also cited data from the Pakistan Bureau of Statistics (PBS), which shows that the car assembly kit imports have decreased by 38% in the first half of the fiscal year 2022-23, compared to the same period of the previous fiscal year (2021-22). As a result, a massive decline in automobile companies’ sales and profit have been noticed.

They have warned that if nothing is done to make the situation better, it may result in unemployment, closure (short or long-term) of assembly plants, and government revenue.

Non-Opening LCs / Letter of Credit Issue in Pakistan

Due to the worsened economic conditions and shortage of US Dollars in the country, the State Bank of Pakistan (SBP) introduced a new policy of “prior approval for imports” last year. Due to this, companies and businessmen couldn’t directly get LCs from banks without taking prior approval.

Many will find no issue in this process. But the problem arises when the approvals are delayed. As reported by different media outlets, businesses are facing difficulty in obtaining approvals due to the shortage of dollars. As a result, many businesses have not been able to import items (raw materials, equipment, etc.) which is disrupting their supply chain. Due to this, many are forced to shut down their operations for the time being.

If you want to see the impact of this issue on different industries and businesses, click the link below.

Non-Opening LCs / Letter of Credit Issue in Pakistan: A Threat to Industries?

As the economic situation is worsening, there is uncertainty in the market due to the devaluation of the Pakistani Rupee, import restrictions, and many other factors. We can only hope that everything will be fine again and that operations will be normalized as most of the media outlets are reporting about the major shutdowns, but there are many small businesses which have already dissolved or are on the brink of shutting down.

You can still buy tires for sale on OLX Pakistan.

What are your views on the current situation? How do you think the economy can get back on track? Share your thoughts in the comment section below.