In the absence of Letters of Credit (LCs) and an unstable economy, Honda Atlas decided to extend the closure of its production plant for an additional 15 days. In a letter to the Pakistan Stock Exchange (PSX), the auto conglomerate cited supply chain disruptions due to the deteriorating economy, along with restrictions on raw materials and CKD imports, as the main reasons for the shutdown. The letter also cited the halting of foreign payments as a reason for the move.
“As a result, the company is not in a position to continue with its production and has ultimately continued to close its factory from April 1, 2023 to April 15, 2022,” the letter added.
Another Honda factory shutdown
Earlier this month, the company announced that given the current economic situation in Pakistan, where the government has restored strict measures, including restricting the opening of letters of credit for importing CKD batches and raw materials and stopping foreign payments, these measures have severely disrupted the company. Suppliers.
As a result, the company was not in a position to continue producing them. In the end, it had to shut down its factory from March 9, 2023 to March 31, 2023.
A wave of shutting down plants
More intimately, this isn’t the first plant closed by Honda or other domestic auto-assemblies. Pak Suzuki kept its production on hiatus through January 2023. In October 2022, Honda announced the closure of its factory for a week, citing a supply chain disruption. “Considering the current economic situation in the country, the government has resorted to drastic measures, including limiting the import of CKD kits and raw materials; the company’s supply chain has also been disrupted due to these measures,” Read the notification by the company.
Similarly, a month ago, Toyota Pakistan announced a halt in production and related assembly of its vehicles from September 1 to 14 in the face of a procedure related to CKD import approval from the State Bank of Pakistan (SBP). According to the company’s notification, the new mechanism came with some hurdles to importing CKD kits, which address inventory issues.
The worrying aspect of this whole situation is that SBP has not yet opened the letters of credit for the import of CKD sets, which has led to a scarcity of production materials, which ultimately leads to no production at all. Thus, the coming days look as bleak as the past few months, as the country is still going through a serious economic crisis.