KARACHI: The amount of outstanding auto loans maintained their sliding path for the 10th month in a row, plunging by 16 per cent to Rs308 billion in April from Rs368bn in June 2022.

The State Bank of Pakistan (SBP) data on Saturday showed that the auto loans witnessed a 2.83pc drop when compared with Rs317bn in March.

Auto leasing by private banks has been facing a downward trajectory given the soaring SBP policy rate, which now stands at 21pc as compared to 7pc in March 2020.

The auto sector has remained under pressure since July 2022 following the central bank’s decision to impose restrictions on the import of completely knocked-down kits which led to frequent plant shutdowns and delays in delivery of vehicles.

However, assemblers continued to give massive price shocks amid plant closures citing the rupee’s depreciation against the US dollar. Besides, the SBP also imposed various curbs like an upper limit of Rs3 million on auto loans to slow down the sales of costly cars followed by the reduction in the auto loan repayment tenor.

Outstanding auto loans fall by Rs60bn in 10 months

Topline Securities CEO Mohammad Sohail said “I think the auto financing will remain at a low ebb at least for the next six months till the return of political stability and clearance of IMF’s loan.”

He said the pace at which auto financing has been declining for the last 10 months may change in the coming months as people are realising that the situation relating to price hikes in vehicles and political and economic conditions are unlikely to change. “Only those who can afford the financing will go for it,” he remarked.

Mr Sohail said auto financing used to enjoy a 40-60pc share in the total vehicles’ sales which has now dwindled to 20-30pc.

However, some market analysts believe that car leasing is almost negligible as monthly instalment has also risen after a continuous rise in the interest rate.

A private bank employee, dealing in car leasing, said many new companies have suspended providing new vehicles to their high-salaried employees.

He recalled that “our bank used to get financing of 350-400 vehicles a month for a few months as compared to 90-100 vehicles currently in which mostly are used locally made low engine power vehicles of less than 10 years old model.”

The country’s sales of cars, jeeps, vans and pickups plunged by 80pc year-on-year to 4,463 units in April and 52pc month-on-month. During 10MFY23, sales clocked in at 114,868 units, down by 50pc year on year.

At the same time, the import of completely and semi-knocked-down kits by the local assemblers plunged by 51pc in 10MFY23 to $682m from $1.4bn in the same period last year.

Published in Dawn, May 21st, 2023