In a key development for the country’s auto sector, Indus Motor Company Limited (INDU) announced that its board has approved an investment of around Rs3 billion (~$10.76 million) for enhancing the localization of production.

The company, the maker of Toyota-brand vehicles in the country, shared the development in its notice to the Pakistan Stock Exchange (PSX) on Thursday.

“We are pleased to announce that the Board of Directors, in its meeting held on 21 February 2024, has approved an investment of around Rs3 billion to be made by the company for additional localization of parts and components of various existing vehicles,” read the notice.

Indus Motor shared that the latest investment is part of the company’s overall plan to continuously increase localization of parts and components of vehicles manufactured locally.

This will allow the company “to reduce outflow of foreign exchange and promote the local auto industry”.

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“The announced investment shall be made towards expenditure in plant and machinery, molds, dies, equipment and related expenses for localization of parts and components to be manufactured locally for various existing vehicles,” Indus Motor said.

The automaker shared the investment is planned to be completed by the third quarter of the calendar year 2025.

The automaker in the past has hinted at increasing its product localization.

Last year, the company launched its Hybrid Electric Vehicle (HEV) Corolla Cross, which as per the company was 50% localised in terms of its value.

Back then, Indus Motor CEO Ali Asghar Jamali said deducting government taxes, over 50% of Corolla Cross value comes from localised parts, which makes it unique among other assembled hybrids in the country.

Indus Motor, which also announced its earnings on Thursday, reported a profit of Rs4.95 billion for the half-year ended December 31, 2023, an increase of 89% when compared with earnings of Rs2.63 billion in the same period of the previous year.

The automaker’s earnings per share (EPS) stood at Rs63.07 in 1HFY24 compared with EPS of Rs33.43 in 1HFY23.

Pakistan’s auto sector has been under pressure with the country’s slowing economic growth, spiking inflation, and high costs of borrowing denting sales of vehicles.

Analysts say it hasn’t helped that the sector – heavily reliant on imports – has moved to increase prices in tandem with dollar’s appreciation with many calling for higher localization to counter the dependency.