KARACHI: Auto financing continued its downward trajectory for the 20th consecutive month, dropping to Rs242.9 billion in February 2024 from Rs246bn at the end of January.
Car loans were at Rs325.8bn in February 2023.
According to State Bank of Pakistan (SBP) data, the total decrease over the last 20 months amounted to Rs125bn, from Rs368bn at the end of June 2022.
Auto sector remained in trouble as car sales fell to 46,417 units in in the first eight months of FY24 from 78,575 units in the same period last fiscal. In contrast, car sales in February inched up to 7,953 units from 7,802 units in January 2024. However, the February 2024 sales were significantly higher than the 3,642 units sold in February 2023.
According to the Pakistan Bureau of Statistics (PBS), the import of completely knocked down (CKD) kits improved to $51 million in February 2024 from $37m in January 2024, signalling a relaxation of restrictions on opening letters of credit by the central bank.
Total CKD imports in 8MFY24 were 23 per cent lower at $473m compared to $614m in the same period last fiscal year.
Many consumers stayed away from the auto market in the last eight months due to high interest rates of 22pc, along with SBP’s curbs on auto financing by imposing an upper limit of Rs3m and a substantial drop in the loan repayment period.
The high prices of vehicles also remained a major hurdle in boosting sales. While some assemblers offered discount packages on registration and other expenses, as well as price discounts, these efforts failed to attract a sizable number of buyers.
Mashood Ali Khan, an auto parts maker and exporter, stated that expensive auto financing at 22pc interest rates appears highly unfeasible for consumers who are already under pressure due to shrinking purchasing power caused by high food prices and unaffordable utility bills.
He believes that “only a single-digit interest rate can boost the auto sales. The current year looks highly tough for the auto sector”.
Regarding government policies, Mr Khan suggested that the government should involve business stakeholders in formulating a five-year industrial policy to enhance production and exports in various sectors.
In its corporate briefing held on March 8, 2024, Indus Motor Company (IMC) expressed expectations of a monthly order intake of 600-1,000 units for the newly launched Toyota Corolla Cross (Hybrid). IMC also stated that it is not facing any LC import issues. According to Topline Securities, IMC views FY24 and FY25 as challenging years, anticipating that recovery will take some time.
Published in Dawn, March 22nd, 2024
