Karachi: Pak Suzuki Motor Company Limited has maintained its robust entity ratings due to its significant market position and the backing of its foreign sponsor, Suzuki Motor Corporation, Japan, despite facing various challenges in the automotive sector.

According to The Pakistan Credit Rating Agency Limited, the Company's ratings benefit from a strong business profile and the full control exercised by its parent company following its delisting from the Pakistan Stock Exchange. The automotive industry has been impacted by macroeconomic adversities affecting both supply and demand. Supply issues, primarily due to difficulties in establishing L/Cs for importing completely knocked down (CKD) kits and other essential raw materials, have hampered production. On the demand side, increased vehicle prices driven by high inflation and soaring interest rates have diminished consumer purchasing power. Despite a 16% decline in industry-wide passenger car sales in FY24, Pak Suzuki Motor Company's sales showed considerable improvements in the last two quarters, with the Suzuki Alto and Swift leading as top sellers.

The company has achieved a 46% market share for cars and light commercial vehicles among members of the Pakistan Automotive Manufacturers Association and operated at about 39% capacity utilization in the first quarter of CY24. Its financial performance has seen a positive trend, with significant foreign liabilities already paid off, which had previously led to substantial exchange losses in CY23. The ratings also reflect the financial support from Suzuki Motor Corporation, Japan, which provided an undertaking on August 23, 2023, to ensure ongoing operations and financial stability for the company.

The ratings hinge on the company's ability to maintain its financial risk profile and the effective management of strategies to ensure adequate liquidity and profitability. Maintaining favorable debt metrics remains a crucial factor for sustaining these ratings.