KARACHI: Auto loan outstanding decreased for 18 consecutive months from Rs 257 billion at the end of November to Rs 251 billion at the end of December 2023, but stood at Rs 337 billion in December 2022, down 2.3% month-on-month. This was an increase of 25.5% month-over-month and 25.5% year-over-year.
According to data released by the State Bank of Pakistan (SBP), the total decline in the past 18 months was a whopping Rs 117 billion, compared to Rs 368 billion at the end of June 2022.
Samiullah Tariq, head of research at Pak Kuwait Investment Company, said the main reasons for the decline in car sales were expensive cars, high markup rates and changes in national banking regulations.
Additionally, it said weak overall economic growth and rising inflation were also impacting sales.
“Auto financing will start to improve within the next three months as the economy stabilizes,” he said.
Mohamed Sohail, CEO of Topline Securities, said the situation could improve if interest rates come down. Sales remain sluggish due to expensive cars and high lease costs.
According to data from the Pakistan Automobile Manufacturers Association (PAMA), vehicle sales in the first half of FY24 fell to 30,662 units from 68,912 units in the same period of FY23.
Total sales of light commercial vehicles (LCVs), vans and pickup trucks nearly halved, from 15,204 to 8,442.
An unprecedented 22% interest rate, sharp rise in car prices, imposition of a Rs 3 million cap on car loans and shorter payment terms had cast a pall over car demand.
Issues related to restrictions on opening letters of credit (LC) due to the foreign exchange crisis also hit production activities, resulting in frequent plant closures by automobile assemblers due to shortages of imported parts and accessories.
Large amount of CKD imported
There is a bright spot as the State Bank has eased restrictions on parts imports. As a result, imports of complete knockdown (CKD) kits began to improve from November 2023.
Parts imports rose from just $23 million in October 2023 to $72 million in November 2023 and $104 million in December 2023, with some improvement in local vehicle assembly this month. It shows that you are doing it.
Indus Motor Company (IMC) has resumed production activities after shutting down its factory from October 17 to November 17, 2023 due to parts shortage.
Pak Suzuki Motor Company Limited (PSMCL) resumed operations in December and January 2023 after repeated closures of its four-wheeler factories.
Honda Atlas Cars Limited (HACL) suspended production from November 1 to 9, 2023, and then resumed production activities in December and January 2023.
Published at Dawn on January 20, 2024