No Layoffs at Indus Motor despite challenges

KARACHI: Indus Motor Company (IMC) has not laid off any employees despite a halt in production due to restrictions on the import of completely knocked down (CKD) units.

A decline in demand due to the impact of flood will also likely result in the volumes of the company dropping up to 50 per cent.

The drop in the sales and production will not only hurt the industry badly but the government is also expected to lose around $1.5 billion in revenue as 39 per cent of car prices consist of taxes.

Indus Motor Chief Executive Officer Ali Asghar Jamali said that the auto sector contributes a mere 3 per cent to the import bill, and restrictions on the CKD import will not help counter the current account deficit.

Instead, import restrictions are affecting the local vendor industry of Pakistan and more than 3 million direct and indirect labour associated with the auto sector, Jamali remarked.

“We understand the economy needs desperate measures due to multiple local and international factors and the government is keen to revive the economy and we fully support the measures taken recently,” he said.

However, the restriction on the import of CKDs will not be of much help, as food and petroleum products imports are among the biggest contributors in widening the current account deficit.

He said that food and petroleum imports are standing at staggering $27 billion, the biggest contributors to the current account deficit. With highest ever sales last year, the auto sector’s share in the import bill was only $2.25 billion.

“All imports are not of the same nature. The authorities need to categorise the imports and while restricting imports of luxury goods, the imports for local production should be allowed,” the IMC chief executive added.

The auto industry is termed as the mother of all industries with a multiplier effect of 10 as a single job created in the original equipment manufacturing (OEM) results in 10 jobs in the allied sector.

The local parts manufacturers and localisation are the biggest victims of import restrictions as IMC alone procures local parts worth over Rs.270 million every day, while various other vendors are also resorting to layoffs due to the current pressures.

Almost all automakers of the country had to go for plant shutdowns for extended periods due to import and letter of credit (LC) restrictions, which has badly affected their productivity and revenue, Jamali noted.

“The plant shutdowns are resulting in unemployment, loss of welfare to workers and many other issues. Currently, IMC is operating at 40 per cent of its capacity while most of the other automakers have halted their production previously,” he added.

Recently, IMC announced to invest $100 million for local production of hybrids and locally manufactured corolla cross, which will be available for the consumers by next year in 2023, Jamali said.

The local production of hybrids will also open doors for technology transfer, GDP increase, employment generation and exports.