KARACHI: Amid uncertain political and economic outlook, local assemblers have started suspending the advance booking of vehicles citing volatile exchange rate and other issues.
Talking to Dawn on Thursday, CEO Lucky Motor Corporation (LMC) Asif Rizvi said the company had closed down advance booking of Picanto, Sportage and Stonic from April 4 due to the rising value of the dollar against the rupee, global supply chain uncertainty of semiconductor chip, rising interest rate and customers’ dissatisfaction on rising prices.
However, the auto industry is now further shocked over an increase in interest rate by 2.5 basis points which would restrict the share of auto financing to 10-15 per cent out of the total car and SUV sales through bank financing from 35-40pc a few months back when interest rate was low, he predicted.
He said auto financing has already slowed down in the last few months due to the State Bank of Pakistan’s (SBP) decisions to curb auto demand.
Mr Rizvi said it was really hard for the assembler to ask the customers to pay balance payment on the booking made on previous rates. “Massive price jump in car and SUV prices followed by fear of further jump in prices coupled with high interest rates had also forced a number of customers to cancel their advance bookings,” he added.
“Another kind of unrest looms over the industry regarding new policies and decisions in case a new government takes control of the country,” he added.
On Thursday, Indus Motor Company (IMC) suspended the bookings of all its vehicles due to uncertainty and exchange rate.
Talking to Dawn, CEO IMC Ali Asghar Jamali said the share of auto financing on the total car and SUV sales a few months back was 25-30pc which would plunge to below 20pc in coming months.
“I see a bad scenario in which nobody knows what will happen next amid economic and political instability,” he said.
Despite massive price hike, auto assemblers had been holding back sizable advance booking of vehicles, with delivery time ranging between two months to 11 months, resulting in “on money” for spot buying.
“I think the negative impact of political and economic crises has finally started hitting the auto sector, which is evident from the suspension of booking by the assemblers,” the CEO added.
Mr Jamali said a number of people had to cancel advance booking in view of rising prices of vehicles.
In the last quarter of 2021, the SBP had tightened rules on auto financing to curtail demand burst in the auto sector. The maximum tenure of auto finance had been reduced from seven years to five years. Overall auto financing limits availed by one person from all banks/DFIs, in aggregate, would not exceed three million rupees at any point in time; and minimum down payment for auto financing had been increased from 15pc to 30pc.
Published in Dawn, April 8th, 2022
