Auto assemblers in Pakistan likely witness delay in import of CKD kits

June 21, 2022 (MLN): Auto assemblers in Pakistan will likely witness a delay in the import of CKD kits in near terms after SBP’s downward revision of import transaction approval limit to $100,000 from $500,000, a report by Optimus Capital highlighted.

To recall, on May 20, 2022, SBP issued a circular wherein authorized dealers would need to seek permission from FX operations department for issuance/amendment of LOC, registration/amendment of the contract, making an advance payment, and authorizing transactions on open account or collection basis.

While automobile assemblers have sufficient advances as of March 2022 to cover their demand for 6-12 months, it is expected that the supply of CKD kits would be adversely impacted, that is until FX reserve risk is subdued.

Moreover, the anticipated increase in car prices amidst currency devaluation may give rise to some order cancellations which would further dampen the outlook for automobile sales volumes in FY23.

With regards to the booking status, the report noted that INDU has completely closed bookings while other assemblers like PSMC and KIA have kept bookings open for specific models. HCAR has kept its bookings open for all cars.

As a result of the positive outcome of the expected talks between Pakistan’s government and IMF, the central bank may ease off the tightening of dollars post resumption of loans.

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