The production shutdown and months-long major downtrend in sales charts are not the only setbacks for Pakistan’s auto industry; another challenge is the continuous decline in the auto financing sector.
According to reports, car financing in Pakistan has decreased for the tenth time in a row.
According to data released by the State Bank of Pakistan, auto loans fell by 16% last month to Rs. 308 billion, compared to Rs. 368 billion in June 2022. Car financing fell by 2.83% month over month, according to the data.
Car leasing by private banks has declined in response to the rising SBP policy rate, which is now 21% compared to 7% in March 2020. According to analysts, auto financing used to account for 60% of total vehicle sales, but has now dropped to 25%.
Because of the steady rise in interest rates, car leasing is in trouble. Furthermore, the industry is under severe strain as a result of consecutive production cuts, assembly plant closures, delayed deliveries, and record-low sales.
And all of this happened after the State Bank of Pakistan imposed import restrictions on completely knockdown kits in July 2022.
Auto sales are facing the same fate
Again, the crisis is not limited to the auto loan industry. Car sales and production are both doomed. According to the PAMA report, car sales fell by 85% year on year (YoY), with 2,844 units sold in April’23 compared to 18,626 vehicles sold in the same period last year.
Similarly, month-on-month sales decreased by 52%, with 4,463 vehicles sold last month compared to 9,351 in March. The reason for this drop is the poor performance of Pakistan Suzuki and Honda Atlas last month.
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