KARACHI: After 27 months, auto financing showed a positive trend as easing interest rates revived demand for car loans in September.

As per data from the State Bank of Pakistan (SBP), the outstanding loans for the period ending September stood at Rs227.541 billion as against Rs227.296bn in August, showing a paltry increase of 0.2 per cent month-on-month (MoM).

Auto financing hit its peak at Rs368bn in June 2022.

The State Bank of Pakistan reduced the interest rate for the first time to 20.5pc on June 10, after nearly three years, from an unprecedented 22pc. This was followed by a further reduction to 19.5pc on July 29 and 17.5pc on Sept 12, thus reviving sales based on auto financing.

Corporate sector analysts offered different views on whether car leasing by the banks will be sustainable amid reports of further drops in the SBP policy rate.

Tahir Abbas, head of research at Arif Habib Ltd (AHL), said auto financing is picking up because banks offer different fixed rates as they anticipate further softening of monetary policy stance.

He said that banks were also locking their markup rates and trying to promote and achieve advances to the deposit ratio threshold.

Mr Abbas said the market has witnessed a demand uptick in cars following a price drop, which also helped revive auto financing.

Topline Securities Chief Executive Mohammed Sohail said that due to economic stability and falling interest rates, “we foresee an increase in auto financing. After many months, we see improvement in sales of two- and four-wheelers”.

Samiullah Tariq, head of research and development at Pak Kuwait Investment Company, said: “Auto financing should sustain as assemblers are giving discounts, while banks are offering fixed rates.” As sales have been down for the past two years, there is pent-up demand, he added.

As per data from the Pakistan Bureau of Statistics (PBS), the local assemblers had imported completely knocked down (CKD) kits worth $213 million during July-September FY24 as compared to $185.5m during the same period last fiscal year, up by 15.23pc.

Car sales swelled to 20,068 units during IQFY25 from 16,021 in the same period last fiscal year while pickups, jeeps, vans, and SUVs sales also crawled up to 7,517 units from 4,961 in the above-mentioned period despite shutdowns by Pak Suzuki Motor Company Ltd and Indus Motor Company.

Published in Dawn, October 19th, 2024