LAHORE: Honda Atlas Cars Pakistan Limited (HACPL) on Tuesday notified the Pakistan Stock Exchange (PSX) that it has extended its production shutdown till October 15.
Reeling from the State Bank of Pakistan’s (SBP) administrative oversight over letter of credits for completely-knocked-down (CKD) kits, HACPL’s production will be effectively halted for almost two weeks with the extension.
The company’s decision to extend non-production days (NPD) till October 15 comes on the back of them already having done so from October 4 to October 12. This translates into HACPL not producing cars for the better part of the first half of October. It is likely that this will translate into a dip in sales because it will exert an upward pressure on lead times for vehicle deliveries. Higher lead times will dissuade customers who may opt for more readily available vehicles. Furthermore, those that do not defect to other brands may be forced to hold off on their purchase due to the higher attached on-premiums on account of the lead times.
The Civic is again a prime example of this with the car retailing for nearly Rs10 million if its on-premiums were included. The on-premiums have reduced, however, Civic still retails upwards of Rs8 million if the premium were to be incorporated. The premiums have led to HACPL suffering a 29 per cent month-on-month (MoM) sales decline in September. September’s decline comes off the back of contractions in July and August for HACPL recording a 40 per cent year-on-year (YoY) decline in their 1QFY23 sales figures.
The other question that HACPL’s extended lockdown raises is the fate of its upcoming HR-V. The company had repudiated media reports that it may defer the launch of its vehicle on account of the economy and the global supply chain. Maqsood Ur Rehman Rehmani, Vice President and Company Secretary of HACPL, and Amir Nazir, General Manager Sales & Marketing, have both denied the rumours with Nazir stating that it would be released “very soon” in conversation with Profit.
It may well be likely that the company is building up the requisite inventory levels ahead of the launch of the HR-V and to better tune the availability of their existing portfolio for 2QFY23 after the problem ridden summer. However, it is equally likely that the company might not have learnt anything, and that there may be more credence to the media reports than would like to admit. Needless to say, the coming quarter will lay HACPL’s plan bare for customers to observe.
At the moment allowing import of CKD units does not make sense, given the pressure on Pakistan’s exchange reserves. However this is only a stop gap measures and govt should clearly spell out strategy on how it plans to increase exchange reserves, other than taking loans and deposits. Moreover bringing down the exchange rate is nullifying the efforts of the curbing imports by putting additional burden on the struggling export sector, already facing low order book and high utility costs.