KARACHI: The amount of outstanding auto loans declined for the 18th consecutive month to Rs251 billion at the end of December 2023 from Rs257bn at the end of November, while it was Rs337bn during December 2022, depicting a drop of 2.3per cent month-on-month and 25.5pc year-on-year.
The total drop in the last 18 months stood at a whooping Rs117bn as it was Rs368bn at the end of June 2022, data released by the State Bank of Pakistan (SBP) showed.
Samiullah Tariq, Research Head at Pak Kuwait Investment Company, said that expensive cars, high markup rates and changes in State Bank’s regulations are majorly responsible for lower car sales.
Besides, he said low overall economic growth and higher inflation are also affecting sales.
“Auto financing should start improving in the next three months as the economy has stabilised,” he said.
Mohammed Sohail, CEO of Topline Securities, said, things may improve when interest rates come down. Sales have remained depressed due to expensive cars and high leasing rates.
As per data from the Pakistan Automotive Manufacturers Association (PAMA), sales of cars during the first half of FY24 shrank to 30,662 units from 68,912 units in the same period FY23.
Total light commercial vehicles (LCV), vans and pickups sales almost halved to 8,442 units from 15,204.
Unprecedented 22pc interest rate, meteoric rise in vehicles’ prices, imposition of the upper limit of Rs3 million on auto loans and the reduction in payment duration had cast gloom on the auto demand.
Issues relating to restrictions on opening letters of credit (LCs) due to the foreign exchange crisis have also hit production activities resulting in frequent plant closures by the auto assemblers due to a shortage of imported parts and accessories.
High import of CKD
There is a silver lining after the State Bank had eased curbs on parts imports. As a result, the import of completely knocked down (CKD) kits started improving in November 2023.
The imports of parts swelled to $72m in November 2023 and $104m in December 2,023 from just $23m in October 2023, signalling some improvement in local assembly of vehicles in the current month.
Indus Motor Company (IMC) resumed its production activities after keeping its plant shut from Oct 17 to Nov 17, 2023, due to a shortage of parts.
Pak Suzuki Motor Company Ltd (PSMCL), after frequent four-wheeler plant shutdowns, resumed operations in December 2023 and January.
Honda Atlas Cars Ltd (HACL), after suspending production for Nov 1-9, 2023, began production activities in December 2023 and January.
Published in Dawn, January 20th, 2024
