Indus Motor temporarily halts production citing material shortage

Indus Motor Company (INDU) has announced the shutdown of its plant for five days citing low inventory and a shortage of components.

The company shared the development in its notice to the Pakistan Stock Exchange (PSX) on Wednesday.

“The company is currently experiencing low levels of raw material and component inventory and facing ongoing supply chain challenges. This has resulted in a shortage of parts and components necessary for vehicle production. As a result, the company is unable to meet its production requirements,” read the notice.

“Consequently, the company has decided to temporarily suspend operations at its production plant from September 26, 2024, to September 30, 2024, both days inclusive,” it added.

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 the dollar’s appreciation with many calling for higher localisation to counter the dependency.

Earlier this month, INDU announced that its board approved an investment of Rs1.1 billion (~$3.94 million) to enhance what it called localisation of production. The investment was in addition to an investment of Rs3 billion announced in February.

During FY24, the auto assembler posted revenue of Rs152.48 billion as compared to Rs177.71 billion in the same period of the previous year, a decline of 14%.

However, despite lower revenue, the company managed to post a gross profit of Rs19.38 billion in FY24, as compared to the profit of Rs7.93 billion registered in same period last year, largely due to the lower cost of sales.