Latest Updates:
Due to supply chain disruptions, Honda Atlas Cars Pakistan will temporarily shut down its plant from November 8 to November 9, 2023. Previously, the plant had been shut down from November 1 to November 7, 2023 and October 24, 2023, to October 31, 2023.
Previous Updates:
The LCs issue is still hurting Pakistan’s automobile industry. After Suzuki extended its plant shutdown, Honda also extended the production suspension. The reasons behind this latest development are the inventory shortage & supply chain disruption.
In the latest development, Honda has extended its plant shutdown till 15 May. But the company had suspended its production many times this year. Here is the latest history of the Honda plant shutdown.
- 9-Mar to 31 Mar
- 1-Apr to 15-Apr
- 16-Apr to 30-Apr
- 1-May to 15 May (latest)
The sales of Honda vehicles are already down compared to the previous year due to the frequent price hikes. These suspensions will further impact the company’s sales negatively.
As the LCs non-opening issue persists, the companies find it difficult to import parts and raw materials for assembling the vehicles. But it is important to note that these companies have been operating in Pakistan for a very long time. If they had localized most of the manufacturing (not assembling), the import restrictions would not have impacted this much.
LC / 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.
LC or a letter of credit is a guarantee from a bank. It ensures that the bank will pay for goods or services (when importing), as long as certain conditions are met. It is used in international trade to ensure payment between buyer and seller.
Do you think that the Pakistan Auto Industry is on the brink of collapse? Tell us in the comment section below.
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