HomeNewsAuto financing drops by Rs104bn in 16 months - Business

Auto financing drops by Rs104bn in 16 months – Business

KARACHI: The amount of outstanding auto loans plunged for the 16th consecutive month to Rs264 billion at the end of October from Rs272bn in September, showing a drop of three per cent on a month-on-month basis and 23.5pc on a year-on-year basis.

The State Bank of Pakistan (SBP) data showed that the total drop in the last 16 months was Rs104bn. At the end of June 2022, the auto financing stood at Rs368bn.

Sales of cars, light commercial vehicles, vans and pickups fell by 44pc to 27,163 units during 4MFY24 as compared to 48,573 units in the same period last year amid thin demand after a steep rise in prices and expensive auto financing. Besides, assemblers have been frequently closing down production activities for over one year due to parts shortages as a result of SBP curbs on opening letters of credit (LCs) for imports.

The imposition of the upper limit of Rs3 million on auto loans and the reduction in payment duration had further discouraged auto financing.

Barring Pak Suzuki Motor Company Ltd (PSMCL), some Korean and Japanese assemblers had reduced prices due to rupee appreciation to lure buyers.

“It seems we are near the bottom in auto financing but we may see some improvement in it as Kibor is coming down,” said Topline Securities CEO Mohammed Sohail.

He said when the central bank will lower the policy rate, which is likely soon, we may see consumers returning to banks for auto loans.“

A private banker said that the overall situation in car financing is very slow. The SBP should enhance the upper limit to Rs7-8m on auto loans from Rs3m, he added.

Published in Dawn, November 24th, 2023

Source: dawn.com

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