Auto loans in Karachi dropped to Rs233 billion in May, marking a 22.5% yearly and 1.2% monthly decrease. According to State Bank of Pakistan (SBP) data, loans were Rs300bn in May 2023 and Rs236bn in April 2024. Compared to June 2022’s Rs368bn, there was a significant Rs135bn decline.
On June 10, the SBP reduced the interest rate to 20.50% after maintaining it at 22% for a year. Despite this, buyers showed little interest in new cars. “I don’t think auto loans will increase since interest rates are still high,” said Tahir Abbas, head of research at Arif Habib Ltd (AHL).
He attributed reduced purchasing power from high inflation and upcoming budget impacts as reasons. Abbas predicted a continued decline in auto financing over the next three to six months. However, Topline Securities CEO Mohammed Sohail anticipated gradual loan increases in the future, noting private sector credit improvements.
In May, car, jeep, LCV, and pickup sales reached a 17-month peak at 10,949 units, up 100% yearly and 4% monthly. Nonetheless, 11MFY24 sales dropped 25% to 90,542 units from 120,845 in 11MFY23.
Consumers avoided new vehicles due to high loan payments, a 22% interest rate, expensive vehicles, and SBP financing restrictions. Auto financing survived thanks to private bank support for used cars up to nine years old.
Meanwhile, Hub Power Holdings Ltd, a Hub Power Company Ltd (Hubco) subsidiary, entered a new partnership with China’s BYD Auto Industry Company Ltd in Pakistan through Mega Motor Company (Pvt) Ltd. They aim to focus on electric vehicles (EVs), pending regulatory and corporate approvals.
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