KARACHI: The meteoric rise in vehicle prices, soaring interest rate and the State Bank of Pakistan’s (SBP) strict rules have resulted in a slight drop of two per cent month-on-month (MoM) in auto financing to Rs361 billion in July.

However, year-on-year (YoY) financing increased by 15pc due to the auto sector’s recovery following the Covid-19 period, according to market analysts.

The SBP’s restrictions on auto financing for amounts greater than three million rupees, an increase in debt burden ratio (debt payment as a percentage of disposable income), a massive increase in car prices, and high-interest rates have resulted in a monthly drop in auto financing, said Samiullah Tariq, the Head of Research at Pak Kuwait Investment Company.

Meanwhile, Tahir Abbas, the Head of Research at Arif Habib Limited (AHL), said auto financing in the coming mon­ths would remain under pressure given availability issues of vehicles due to long delays in delivery, the SBP’s strict measures to confine auto financing, high car prices, and interest rates.

According to Top Line Securities, Honda Atlas Cars Limited (HACL) informed an analyst briefing earlier this month that auto financing contributes 40pc of total HACL sales and would drop to 30pc under the current scenario. Honda management predicted a 25-35pc drop in sales in FY23 as a result of higher prices and high-interest rates.

Pak Suzuki Motor Company Limited (PSMCL) reported to analysts in May 2022 that auto financing accounts for 35pc of total sales. However, PSMCL anticipated a 5-10pc drop in sales during FY23 as a result of rising prices, interest rates, and shorter loan terms.

In May 2022, Indus Motor Company (IMC) informed analysts that auto financing accounted for approximately 26pc of total IMC sales. The company anticipates a 25–35pc drop in volumetric sales in FY23. IMC on Monday resumed booking of vehicles after suspending it on May 18, 2022, due to parts shortages and uncertain exchange rate parity.

Overall car, truck, and SUV sales fell to a 23-month low of 11,883 units in July 2022, representing a 58pc and 52pc decrease MoM and YoY, respectively.

Published in Dawn, August 23rd, 2022

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

By-election trends
Updated 23 Apr, 2024

By-election trends

Unless the culture of violence and rigging is rooted out, the credibility of the electoral process in Pakistan will continue to remain under a cloud.
Privatising PIA
23 Apr, 2024

Privatising PIA

FINANCE Minister Muhammad Aurangzeb’s reaffirmation that the process of disinvestment of the loss-making national...
Suffering in captivity
23 Apr, 2024

Suffering in captivity

YET another animal — a lioness — is critically ill at the Karachi Zoo. The feline, emaciated and barely able to...
Not without reform
Updated 22 Apr, 2024

Not without reform

The problem with us is that our ruling elite is still trying to find a way around the tough reforms that will hit their privileges.
Raisi’s visit
22 Apr, 2024

Raisi’s visit

IRANIAN President Ebrahim Raisi, who begins his three-day trip to Pakistan today, will be visiting the country ...
Janus-faced
22 Apr, 2024

Janus-faced

THE US has done it again. While officially insisting it is committed to a peaceful resolution to the...