KARACHI, Dec 14: As many as 70 per cent of locally assembled cars are being sold through leasing and bank financing schemes while the rest of 30 per cent are being delivered on cash basis.
Majority of car buyers belong to corporate sector, business professionals, executives of multinational companies etc., while businessmen and feudals prefer to buy on cash basis.
Buyers' passion for new cars could be gauged from car financing and leasing figures that boosted to Rs24.5 billion in 2003-2004 as financing authorities had been charging interest rate of seven per cent.
In 2001-2002, the combined net credit by banks and leasing companies was Rs4.47 billion and the interest rate was being charged at 17 per cent. In 1997-1998, there was hardly 20 per cent share of cars being sold through leasing and bank schemes and only Rs737 million were disbursed for leasing and auto financing of cars at the interest rate of 23 per cent.
Senior executives of Indus Motor Company (IMC) expect FY05 as another buoyant year for the auto industry in terms of car sales through leasing and bank financing depending on the continuity of the positive economic indicators.
They said that the car sales grew impressively in the last two years due to attractive leasing and bank financing otherwise the industry's financial health would have been very weaker from the current status.
They added that prospective buyers of new cars are more attracted in booking through banks these days while financial institutions have also plunged in car financing business in order to lure more buyers.
The IMC executives, however, did not give the exact percentage for the increase in car leasing and bank financing FY05 from the current 70 per cent share but they said that the percentage was set to increase in the next year in case macroeconomic indicators, remittances, agriculture sector, per capita income and disposal income continue to show robust performance.
"Demand for cars is still at its peak and the market has tremendous liquidity," they added. They, however, claimed that over 90 per cent cars in India were being sold through leasing and bank financing packages.
According to 2003-04 Annual Report of State Bank of Pakistan the net consumer credit grew strongly in the year, rising by Rs75.6 billion compared to Rs48.6 billion in the preceding year.
Among the consumer sector, although automobiles and personal loans registered major increase in absolute terms, highest growth was observed in financing for consumer durables during the year.
These rising consumer loans had a second order effect on demand for corporate loans. As the demand for automobiles and consumer durables (particularly electronic items) increased significantly, the corporate borrowings also expanded for increasing production in these sectors.
This is reflected in robust growth in large-scale manufacturing especially in automobiles and electronics during 2003-2004, the report added. The rising import of cars in July-November 2004 after budget 2004-2005, the IMC official said that this was certainly a potential threat to the financial viability of the local industry.
A total of 96,674 cars were sold in 2003-2004 as compared to 62,000 units in 2002-2003. In January-October 2004, 91,372 units were sold as compared to 65,568 units in the same period of 2003.
