Auto financing has broken all previous records this year with a massive increase in demand resulting from the arrival of new cars and decreased rates of interest. Ironically, it had a minimal increase of just one percent on a Month-over-Month (MoM) basis.
Car industry analyst Arslan Hanif told DAWN News that this negligible growth is due to the new regulations of the State Bank of Pakistan (SBP) to curb the rising import bill and achieve a balance of payments. He added that the effects of these regulations will be clearer around January 2022.
Hanif claimed that the increase in interest rates from 7 percent to 9.75 percent in September has impacted the demand for vehicles as well. He explained that although the Year-over-Year (YoY) increase in auto-financing is great for the car industry, it has added significantly to the towering import bill that the government seeks to lessen.
These measures are being taken to pin down the rising sales and imports of luxury vehicles in line with the government’s aim to encourage the sales of locally assembled economy cars and to promote the local manufacturing of affordable cars and electric vehicles (EVs).
The recent sales and production data from the Pakistan Automotive Manufacturers Association (PAMA) has reflected the shift in demand for vehicles as car sales dropped from 17,413 units in October to 15,351 units in November.
Umair Naseer of Topline Securities remarked that an impending rise in regulatory duty on Completely Built-up Units (CBUs) will push up car prices to hurt the sales of CBU cars even more.