Outstanding auto loans in Pakistan experienced a continuous decline for the 16th consecutive month, reaching Rs264 billion by the end of October, down from Rs272 billion in September. This reflects a 3 percent decrease on a month-on-month basis and a 23.5 percent decline on a year-on-year basis.
Auto loans reached a record high of Rs368 billion in June 2022, but over the past 16 months dropped by Rs104 billion, or 28%, as the State Bank of Pakistan (SBP) tightened monetary policy to curb inflation and external imbalances.
The decline in auto loans coincided with a significant drop in the sales of cars, light commercial vehicles, vans, and pickups, which fell by 44 percent to 27,163 units during the first four months of the fiscal year 2023, compared to 48,573 units in the same period the previous year.
This decrease in demand was attributed to rising prices and expensive auto financing. Assemblers also faced challenges as production activities were frequently halted for over a year due to parts shortages resulting from SBP restrictions on opening letters of credit for imports.
The imposition of an upper limit of Rs3 million on auto loans, coupled with a reduction in payment duration, further discouraged auto financing. While some Korean and Japanese assemblers, excluding Pak Suzuki Motor Company Ltd (PSMCL), reduced prices due to rupee appreciation, the overall market remained slow.
