Indus Motor Company (IMC), which assembles Toyota vehicles in Pakistan, stated in a management briefing that unexpected currency depreciation and State Bank of Pakistan import restrictions provide unexpected external obstacles for the country's automotive industry (SBP).
According to a statement from IMC cited by Topline Securities, "certain participants may depart the market" if the current scenario continues. This was covered at IMC's Corporate Briefing Session (CBS) about the business forecast and financial results for the first quarter of the current fiscal year.
During the meeting, it was disclosed that IMC is presently functioning at 40–50% of its manufacturing capacity since it lacks CKD parts and is subject to SBP constraints. IMC management, however, does not anticipate these restrictions easing anytime soon. The next three months of IMC's order book are full at the present manufacturing rate. If the limitation is eased, these orders might be fulfilled in 4-5 weeks, the company said.
The demand for the whole car sector will be negatively impacted in the future by floods causing havoc, increasing inflation, and poor consumer spending power. Due to increasing interest rates and more stringent financing requirements, vehicle financing has also decreased from 35% to barely 10%.
The localization rate in value terms for the Yaris and Corolla is around 65%, according to IMC management, after 39% in taxes and charges have been subtracted. Regarding the refund policy, the management reported that 400 to 500 consumers had canceled their reservations and received their money back plus interest.
It is on track to invest US$100 million in local HEV (Hybrid Electric Vehicle) production, and the business expects to introduce its model, the Toyota Corolla Cross hybrid, by the end of the following year in 2023.
In the first quarter of FY23, Pakistan's automobile sales decreased by 51% YoY to 47,178 units, of which IMC car sales down by 52% YoY to 8,994 units. In Q1-FY23, net sales decreased by 43% to Rs37 billion from Rs66 billion in Q1-FY22 as a result of lower output as a result of the SBP's restriction on imports, which made the firm have to implement repeated shutdowns throughout the period. The main reason for the 76% YoY decline in profit after tax, which went from Rs5.4 billion to Rs1.3 billion, was a gross loss.
Due to the depreciation of the rupee versus the US dollar, greater freight costs, and higher commodity prices, IMC reported a gross loss of 6% in Q1-FY23 compared to a gross profit of 11% in Q1-FY22. According to the corporate management, a loss would also occur in Q2 of FY23, although it would be smaller than it was in Q1 of FY23.