Auto financing jumps 44pc to Rs346bn

Published November 19, 2021
Auto financing reached Rs346 billion as of October 2021, showing a jump of 44 per cent year-on-year and 2.2pc on month-on-month. — Reuters/File
Auto financing reached Rs346 billion as of October 2021, showing a jump of 44 per cent year-on-year and 2.2pc on month-on-month. — Reuters/File

KARACHI: Auto financing reached Rs346 billion as of October 2021, showing a jump of 44 per cent year-on-year and 2.2pc on month-on-month, figures released by the State Bank of Pakistan on Thursday revealed.

Car financing went up from Rs240bn in October 2020 to Rs338bn in September 2021, the SBP figures showed.

“Impressive auto-financing by the banks till October was based on the previous approvals during the last three to six months,” Pak Kuwait Investment Company Head of Research Samiullah Tariq said.

The SBP had reduced the period of auto-financing from seven to five years along with decreasing the debt burden ratio from 50pc to 40pc. Other measures by the central bank included aggregate financing limit to be availed by one person from all banks not exceeding Rs3 million at any point in time and minimum down payment for auto financing increased from 15 to 30pc. These measures are applicable to imported vehicles and locally manufactured vehicles with an engine capacity of over 1,000ccc.

Imports of parts, accessories in 4MFY22 post robust growth of 162pc

“I think car sales through bank financing will taper by 25-30pc in the next two to three months in view of the SBP’s decision to curb auto demand through various measures,” he said.

Mr Tariq said the impact of central bank’s decision has been visible in the October 2021 import of completely and semi-knocked down (CKD/SKD) kits by the assemblers, plunging to $112 million from $151m in September 2021. However, import of parts and accessories during the first four months of fiscal year 2021-22 (4MFY22) by the car assemblers posted a robust growth of 162pc to $520m as compared to $198m in the same period in FY21.

Imports of completely built up (CBU) cars — new and used — have also dropped to $28m in October from $36m in September 2021. Total imports of CBU units in 4MFY22 surged by 112pc to $123m from $58m in the same period in FY21.

Imports of CKD/SKD kits were actually made on old advance booking orders of the assemblers.

Mr Tariq said the share of auto-financing in total car sales ranged between 30 to 40pc. “The real impact of SBP’s decision will be visible in March/April 2022 as the assemblers had been holding sizable booking of previous orders but the share of car financing by the bank is feared to go down to 20-25pc,” he added.

A number of car assemblers including Korean assemblers are giving delivery time of March to June 2022 in case a buyer makes an advance booking today.

Excluding Toyota models, Pak Suzuki Motor Company Limited (PSMCL) has already temporarily suspended booking of Suzuki Alto Automatic and Cultus Automatic and VXR versions owing to looming semi-conductor chip shortage.

Besides, car prices were raised by 5-15pc recently by the assemblers recently owing to rising cost of production on account of soaring raw material prices, freight charges and rupee devaluation against the dollar. The government had slashed duties and taxes in the Budget FY22 which resulted in price cut in cars and SUVs by 62,000-400,000. However, the effort was futile after assemblers raised prices upwards earlier this month.

Published in Dawn, November 19th, 2021

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