Indus Motor seeks payment waiver on delayed delivery

Indus Motor seeks payment waiver on delayed delivery

KARACHI: Indus Motor Company Limited (INDU) – the manufacturer of Toyota vehicles in Pakistan -has sought waiver on payment to customers for delayed deliver.

“Due to Letter of Credit (LC) issues, the company has recommended the government to suspend payment to customers for delayed delivery which is set at KIBOR+3 per cent,” according to analysts at Topline Securities.

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The company conducted its 1HFY23 analyst briefing on Thursday where management discussed financial performance and future outlook.

The management stated that vehicle sales declined by 52 per cent YoY in 1HFY23.

In 1HFY23 INDU market share stood at 17.9 per cent compared to 20.4 per cent in 1HFY22, PSMC at 46.3 per cent compared to 38.4 per cent and HCAR at 10.6 per cent compared to 10.3 per cent.

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Drop in volumetric sales was due to import restrictions on parts. According to the management, sales would have been better in the range of 10-15 per cent in case of full allowance of LCs. The State Bank of Pakistan (SBP) had allowed 50 per cent of import quota till November 2022.

After December the LC issue has been transferred to the discretion of banks but this led to import quota declining further in the range of 25-30 per cent for different auto assemblers.

Due to LC issues mentioned above company has recommended the government to suspend payment to customers for delayed delivery which is set at KIBOR+3 per cent.

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“Company does not plan on any downsizing of staff as of now. Because they are of the view that these are external circumstances and not the fault of employees.” The company has made other contingencies such as management reducing fuel expenses by 25 per cent and saving on electricity etc, according to the briefing.

Commenting on the super tax, management stated that once a new taxation regime is imposed it is assumed to be perpetual.

Short term investments of the company have reduced in December 31, 2022 due to reduction in advances from customers.

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Regarding the recent price increase management stated that they are expecting slight operating profitability in January-March 23 quarter but with the volatile economic environment currently prevalent, it is hard to make firm assumptions.

Commenting on new model launch management stated that these are planned 36-48 months in advance and new variants of all brands such as Yaris etc. will be launched as per plan.

Hybrid vehicle launch is also as per initial stated plan and will only face delay due to external circumstances.