Suzuki announces plant closure and price reduction

LAHORE: Pak-Suzuki Motor Company (PSMC) has announced both a temporary shutdown of its car plant and a downward revision of its prices across its entire completely-knocked-down (CKD) portfolio.

PSMC has notified the Pakistan Stock Exchange (PSX) that it will be suspending its automobile production from 18th-19th August 2022 on account of its depleted inventory levels. It cites the State Bank of Pakistan’s (SBP) import restrictions on CKD units as the main reason for the inventory shortfall. Its motorcycle plant will, however, remain operational during the aforementioned duration.

Within a matter of hours after notifying the PSX, PSMC also announced a downward revision of its prices across its CKD portfolio. 

The new prices for the company's Alto lineup are as follows: 

The new prices for its Cultus lineup are as follows: 

The new prices for its Wagon-R lineup are as follows: 

The new prices for its Swift lineup are as follows: 

The new prices for its Bolan and Ravi lineups are as follows: 

The revised retail prices are inclusive of FED and Sales Tax and exclusive of Advance Income Tax. 

PSMC’s circular states that the aforementioned prices are subject to change without any prior notice and prices at the time of delivery shall apply. Any government taxes and levies applicable at the time of delivery shall be borne by the customers. They will come into effect on August 16. 

PSMC’s decision to revise its prices downwards comes a day after Toyota Indus Motor Company (IMC) announced theirs. 

The motor company has neither cited a reason for the price reduction nor commented upon the matter. However, one can surmise that this decision is on the back of the PKR appreciating against the USD. 

Speculation would be incorrect but given that Pakistani automotive manufacturers operate on a Just in Time (JIT) production process, this is the likely case. 

PSMC’s circular highlighting inventory shortfalls elucidates upon the fact that some, if not many, of the automobiles may not have yet been produced. Furthermore, it cites the SBP’s increased import restrictions as the rationale for the inventory shortfall. 

If you are short on inventory that has to be imported to produce a final vehicle, and the cost of those imports has fallen, then the price of the final product can only be reduced if it has not been made yet. 

However, PSMC did not need to do this. It could have sacrificed PR costs in the face of IMCs decision for retaining higher margins. PSMCs decision is likely because, like IMC, it recorded poor performance in the month of July with an overall sales decline of 47%. 

PSMC may have also been prompted to do so soon after IMC fearing the potential backlash it may receive, alongside the backlash it may have already received following IMCs decision, if another manufacturer after IMC announced a downward revision before they could. 

The motor company's decision is indicative of other automotive manufacturers potentially following suit. However, its abstinence from announcing a downward revision in its motorcycle business leaves customers in the  two-wheeler segment in the dark about whether or not, they too will benefit from the PKR’s strides against the USD.