Pakistan’s auto industry is struggling to meet its scheduled delivery periods as restrictions have hindered timely import of auto parts, prompting one assembler to offer refunds to its customers, an unusual development that comes on the back of the country’s falling foreign exchange reserves.
The industry, highly dependent on imports, has been caught in the midst of an exchange-rate crisis with players in the auto sector either passing on the impact of rupee depreciation to its customers or, in the case of Indus Motor Company (IMC), offering its customers refunds with an additional payment of interest on it.
“The entire industry has scaled back production – in some cases, more than 50% of capacity,” Indus Motor Company CEO Ali Asghar Jamali told Business Recorder on Monday.
“There is no clarity (on the exchange rate). We will give the option to the customer to take a refund with a full-interest amount.
“In case the customer doesn’t want to choose this option, they will have to wait at least three months from the delivery month given on the PBO (Provisional Booking Order Form) and pay the price-difference due to the exchange rate situation,” Jamali added.
Last month, IMC announced that it was facing major issues that impacted the delivery schedule of already-booked orders.
“The State Bank of Pakistan's LC approval constraints for CKD imports, and drastic rupee devaluation are causing considerable problems for the auto industry and have disrupted IMC's production,” the company announced in June.
“Thus, we are unable to meet the tentative delivery timelines committed on pending orders. The prevailing situation is being reviewed and we will be soon announcing the revised delivery schedule as well as the re-opening of order intake,” it added.
Earlier, Sunny Kumar, Research Analyst at Topline Securities, said all auto sector companies would be hiking car prices because of rupee’s depreciation.
“The last pricing most of the carmakers did was when the dollar stood at Rs185. It has now crossed Rs225.”
Ongoing economic and political uncertainty has continued to take a toll on the Pakistan rupee, which closed near the 230 level against the US dollar in the inter-bank on Monday.
Last week, the rupee endured its worst week in over two decades, hitting fresh lows in each and every session to eventually end at 228.37 against the US dollar – losing 7.6% to the greenback.
Additionally, it was reported on Monday that the SBP is also discouraging trading in the inter-bank market, asking commercial lenders to manage import-payment requests from their own inflows, such as exporter accruals and remittances.