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KARACHI: The automotive industry has expressed conflicting opinions over the quantum of improvement in car sales through banks’ financing schemes.

Some dealers said that the dip in interest rate from 10 to 7 per cent in almost a year had failed to bring any noticeable lift in car financing, while others believe a 10pc jump.

Buyers still prefer locally assembled cars on cash payment, as bank financing entails cumbersome documentation that people mostly wish to avoid.

Car financing enjoyed a boom period during 2004-07 when its share was 70-75pc out of total car sales, owing to banks liberal policy besides different incentives. Banks were sanctioning auto loans with 14-18pc Kibor plus interest rate depending on loan maturity.

“I am sure that the share of car financing has improved to around 30pc of the total sales as compared to 20-22pc a year ago,” Indus Motor Company (IMC) Chief Operating Officer Ali Asghar Jamali told Dawn.

One of the reasons for the boom in car sales, according to a recent report of Carmudi, is the reduction in interest rates over the course of the year. “Car financing still stands at less than 35pc of the total sales in Pakistan.”

The portal believes that after a 24pc improvement during the first three quarters of 2014-15, sales of new and used vehicles are expected to hit a three-year high of 165,000 units. The IMC official hoped that the new auto policy would pave the way for growth.

The country’s population has galloped to 180-200 million, thus there are only 16 cars for every 1,000 persons — the lowest rate among emerging economies.

The demand for automobiles is likely to surge as new auto manufacturers can capitalise on falling discount rates, he added.

He supported the government’s move of offering incentives and tax breaks to new entrants to boost competition for the benefit of consumers, but the motto should be to promote ‘make in Pakistan’.India, Thailand and Indonesia have nurtured their industries until the threshold volumes were achieved to gain competitiveness, he added.

“The industry still feels threatened over thriving used car imports, which are not only eating up the local manufacturers’ market share but inflicting a heavy damage to national exchequer as well.”

At present, the market share of used cars is estimated at over 16pc, which is expected to grow to 20pc by year-end, he said. “If the import continues at present rate, very soon the local auto industry will grind to a halt.”

India and some Far-East countries including Thailand have restricted used cars imports through tariff and non-tariff barriers to ensure domestic production, he added.

Published in Dawn, July 2nd, 2015

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Comments (8) Closed

JUSTICE Jul 02, 2015 09:50am

Mojority of the people in Pakistan have lot of dirty money, they would always preffer to use cash.

Sachin Tandon Jul 02, 2015 10:04am

Indian's will no way buy any Imported Used Car. Even BMW & Audi are manufactured in India and Exported to US & Europe.

Just Someone Jul 02, 2015 12:29pm

We need to reduce the imports of used cars, especially through the abuse of the schemes meant for overseas / non resident Pakistani's. Perhaps the govt. can discourage such imports by putting a condition that such cars can not be sold (or even transferred on open letter), for a period of three years after their import. We also need to discourage the import of new cars. With the low interest rates in place, now is the time for the growth in manufacturing.

sheryar Jul 02, 2015 12:35pm

low interest rates? the banks are offering 19-22% interest which is a lot of interest

Azhar Jul 02, 2015 01:58pm

Local manufacturers are earning too much. You have to buy 800 cc local manufactured about 740000 rupees.

Sachin Tandon Jul 02, 2015 02:33pm

@Azhar If you convert PKR 7.40 Lac to INR it Rs 5.0 Lac, In INR 5.0 Lac you can get excellent 1000 cc car. You can check from website Maruti Swift, Ritz, i20. If there is good relations between India & Pakistan & If Pak Govt allows, you can get these excellent cars at the cost of simple 800 cc car.

Khan Jul 03, 2015 08:51am

Used imported vs locally manufactured cars - why ban the import? Is it wise enouigh to ban the import of used cars, which are far better in quality and costs too low? W

Khan Jul 03, 2015 09:01am

Used imported cars vs locally manufactured cars: Why ban the import of used cars, which are far better in quality and cost substantially low amount? why deprive Pakistani customers from getting these benefits? So the solution is not banning the import of used cars, but to improve local quality and compromise profit margins. The world is a place where only the fittest survive. So face the competition or quit the market. The Government should not compromise the welfare of a large number of customer to protect a few inefficient manufacturers.