KARACHI: Auto financing declined for the 23rd month to Rs233 billion in May, down 22.5 per cent year-on-year and 1.2pc month-on-month.
The State Bank of Pakistan (SBP) data showed that the outstanding loan stood at Rs300bn in May 2023, while it was Rs236bn in April 2024.
The total decline in auto financing stood at Rs135bn if compared with the June 2022 figure of Rs368bn.
The SBP slashed the interest rate to 20.50pc on June 10 after keeping it pegged at 22pc for nearly a year. However, a cut in the policy rate did not create any interest among buyers in purchasing new cars.
Hubco ventures into EVs with China’s BYD
“I do not think that the auto financing number will improve as the interest rate is still high,” said Tahir Abbas, head of research at Arif Habib Ltd (AHL).
He said high inflation in the last one and a half years has squeezed people’s purchasing power, while disposable income will shrink after the Budget FY25 because of the government’s high taxation measures.
“Declining trend in auto financing will continue to dominate in the next three to six months,” Abbas anticipated.
However, Topline Securities Chief Executive Mohammed Sohail said: “I expect a gradual increase in auto loans after a few months. Private sector credit has started showing signs of improvement.”
Sales of cars, jeeps, LCVs and pickups touched a 17-month high at 10,949 units during May, up by 100pc year-on-year and 4pc month-on-month. However, the total 11MFY24 sales were lower by 25pc to 90,542 units from 120,845 in 11MFY23.
Consumers remained shy towards new vehicles due to high monthly loan instalments, a 22pc interest rate, high vehicle prices, and the SBP’s curbs on financing.
Private bank financing for used cars up to nine years old has kept auto financing alive for the last two to three years.
BYD electric vehicles
Meanwhile, Hub Power Holdings Ltd, a wholly-owned subsidiary of Hub Power Company Ltd (Hubco), has ventured into a new line of business with China’s BYD Auto Industry Company Ltd in Pakistan through its associated company, Mega Motor Company (Pvt) Ltd, to focus on electric vehicles (EVs).
In a stock filing on Friday, Hubco said the consummation of this new venture will include executing the definitive agreements and purchasing assets and is subject to corporate and regulatory approvals.
Published in Dawn, June 22nd, 2024
