Auto Financing Declined for 20th Consecutive Month

Auto financing in Pakistan continued its downward trajectory for the 20th consecutive month, dropping to Rs 242.9 billion in February 2024 from Rs 246 billion at the end of January. Car loans stood at Rs 325.8 bn a year earlier in February 2023.

State Bank of Pakistan (SBP) data revealed that the total decrease over the last 20 months amounted to Rs 125 billion, from Rs 368 billion at the end of June 2022. The auto sector remained in trouble as car sales fell to 46,417 units in the first 8 months of FY24 from 78,575 units in the same period of the previous fiscal year.

According to the Pakistan Bureau of Statistics (PBS), the import of completely knocked down (CKD) kits imp­roved to $51 million in February 2024 from $37mil in January 2024, signaling a relaxation of restrictions on opening letters of credit by the central bank. Total CKD imports in 8MFY24 were 23% lower at $473mil compared to $614mil in the same period last fiscal year.

Car buyers are showing the least interest in auto financing due to high-interest rates of 22% (which was around 7% a couple of years ago), along with SBP’s curbs on auto financing by imposing an upper limit of Rs3mil and a substantial drop in the loan repayment period.

The high prices of vehicles also remained a major hurdle in boosting sales. While some assemblers offered discount packages on registration and other expenses, as well as price discounts, these efforts failed to attract a sizable number of buyers.

Source: Dawn

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