In February 2024, Pakistan’s auto financing marked its 20th consecutive month of decline, falling to Rs242.9 billion, down from Rs246 billion at January’s end, as reported by the State Bank of Pakistan (SBP).
This ongoing downtrend reflects a significant reduction from Rs325.8 billion in February 2023, culminating in a Rs125 billion drop since June 2022.
Despite a slight increase in car sales to 7,953 units in February 2024 from 7,802 units in January, the auto sector continues to face challenges, with sales plummeting from 78,575 units in the first eight months of the previous fiscal year to 46,417 units in the same period of FY24.
However, this February’s sales showed a substantial recovery compared to the 3,642 units sold in February 2023.
The import of completely knocked down (CKD) kits saw an improvement, with expenditures rising to $51 million in February 2024 from $37 million in January, suggesting an easing of the central bank’s restrictions on letters of credit.
Despite this, CKD imports during the first eight months of FY24 were 23% lower than the previous year, totaling $473 million compared to $614 million.
The auto market has seen reduced consumer interest, attributed to high interest rates of 22%, restrictive auto financing measures by the SBP, including a Rs3 million cap on loans and shortened loan repayment periods, and the high prices of vehicles.
Efforts by some assemblers to lure customers with discounts and promotions have not significantly boosted sales.
Industry experts have pointed out that the prevailing high interest rates make auto financing unattractive, exacerbating the impact of reduced purchasing power due to elevated food and utility costs.
They advocate for a reduction in interest rates to single digits to revive the auto sector and calls for the government to engage with business stakeholders in crafting a five-year industrial policy aimed at enhancing production and exports.
Indus Motor Company (IMC) remains optimistic about its new Toyota Corolla Cross (Hybrid), expecting a monthly order intake of 600-1,000 units.
Despite the challenging outlook for FY24 and FY25, IMC reports no issues with letter of credit imports, indicating a potential slow recovery for the sector.
