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Auto Financing Shrinks For 13th Consecutive Month

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Auto Financing Shrinks For 13th Consecutive Month

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Diminishing car sales and dwindling production combined with burgeoning interest rates have marred auto financing. As per the reports, car financing marked a new low for the 13th time in July, observing a downtrend of Rs. 8.5 billion. The car loan amount decreased from Rs. 293.7 in June to Rs. 285.2 in July.

Based on data from the State Bank of Pakistan (SBP) revealed that car financing was at its peak in June’22, clocking at Rs. 368 billion. However, the digit has been losing streak since then in the face of rapid jumps in interest rates, reaching a whopping 22%. Furthermore, declining demand in conjunction with the historic rise in prices make the matter worse.

What Experts Say?

Industry Experts further pointed out that the combination of a 25% interest rate based on Kibor plus, along with measures introduced by the State Bank of Pakistan (SBP) to decrease demand for cars, is hindering customers for obtaining bank loans. 

Moreover, there are numerous speculations circulating within the market regarding the trajectory of interest rates—whether they will rise or remain unchanged. These speculations are influenced by concerns over mounting inflation and apprehensions about further escalations in vehicle prices due to the devaluation of the rupee.

Experts expressed their view that the automotive sector is anticipated to grapple with challenges until December, and the sales landscape might continue to be concerning even through the first half of 2024. There appears to be no indication of a significant reduction in interest rates, vehicle prices, or stability between the rupee and the dollar in the near future.

Given the prevailing situation of the industry, Ali Asghar Jamali, Chief Executive of Indus Motor Company (IMC) stated the ongoing economic fuss has unleashed a cascade of repercussion for auto sector that it has never witnessed in past.

What do you think about the recent update regrading auto financing? Drop your thoughts in the comments section.



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