Auto financing rose marginally to Rs235.454 billion in December 2024, up from Rs234.6 billion in November, reversing a decline observed in prior months, according to data from the State Bank of Pakistan (SBP).
Auto financing had previously dropped from Rs236 billion in October to Rs227.541 billion in September and Rs227.296 billion in August. The peak was recorded at Rs368 billion in June 2022.
The SBP has implemented cumulative policy rate cuts of 900 basis points since June 2024, reducing the rate to 13% in December. Market analysts anticipate a further reduction to 12% in the upcoming Monetary Policy Committee meeting scheduled for January 27, citing a consistent decline in inflation.
Industry stakeholders also believe the current Rs3 million auto loan cap limits demand. Assemblers and bankers are advocating for an increase to Rs5–6 million to stimulate the market further.
Market conditions, including budgetary measures, political stability, foreign exchange reserves, and rupee-dollar parity, will play a crucial role in shaping the auto sector’s outlook. Historically, restrictions on imported goods to manage foreign exchange crises have impacted consumption.
Topline Securities forecasts the Consumer Price Index (CPI) for January to be 2.5–3% year-on-year, significantly lower than the 28.73% average recorded in the same period last fiscal year. Analysts suggest that if inflation continues to decline, further rate cuts could help revitalize auto financing and the broader auto market.
