SBP limitations and currency depreciation harm the automotive industry: Indus Motor
Indus Motor Company Limited (INDU), which assembles Toyota automobiles in Pakistan, claims that continued rupee devaluation and import restrictions imposed by the central bank are hurting the industry.
The revelation was revealed by the company’s top executives during a corporate briefing on November 8, 2022, which was organised to discuss its most recent financial result and forecast.
The State Bank of Pakistan’s (SBP) import limitations and the erratic exchange rates, according to Arif Habib Limited (AHL), which took part in the session, continue to offer difficulties for the auto industry.
All Toyota automobile reservations with Indus Motor Company are halted in Pakistan.
Officials added that the industry is struggling with rising manufacturing costs brought on by the present depreciation of the rupee, while demand has decreased as a result of the economic crisis, high loan rates, and increased tariffs and taxes on automobiles.
They demanded the elimination of import restrictions, claiming that the auto industry accounts for just 3% of the total import expenditure. The business stated that the value of the Corolla and Yaris localization rate is 65%, while the value of the IMV and Fortuner localization rate is 55%.
Next year, Indus Motor will release its first locally built HEV SUV.
Given the continued import limitations, the management anticipates another quarter of manufacturing losses, according to the brokerage house.
Additionally, the business stated that the recent flood damage, together with increasing inflation and poor consumer purchasing power, will have a negative impact on demand for the overall auto sector in the future, according to AHL.
Earlier this month, INDU released its financial results for QFY23. The firm reported a Profit After Tax (PAT) of Rs. 1,297 million and an EPS of Rs. 16.5—both of which were down 76% YoY.
As the currency fluctuates, Indus Motor Company lowers car prices.
Negative gross margins as a result of decreasing sales revenue (-43% YoY) were the primary cause of the decline in earnings. According to Indus, as a result of decreased output and frequent plant shutdowns brought on by the SBP’s restriction on imports, the volume of CKD units sold decreased by 52.4% YoY.
According to data supplied by Pakistan Auto Manufacturers Association, the country’s auto sales fell by more than 50% to 34,472 units during the first quarter of 2022–2023 (July–September), as opposed to 68,897 units registered during the same period in the previous year.