Outstanding consumer financing for transport, which includes purchase of cars etc, stood at Rs353 billion as of August 2022, a decline of Rs8 billion or 2.6% month-on-month (MoM), figures released by the State Bank of Pakistan (SBP) revealed on Tuesday.
This is the lowest level since January 2022, said Arif Habib Limited (AHL) in a note.
“Moreover, the cumulative decline in auto financing since June 2022 to August 2022 has been around Rs15 billion.”
The dip in financing comes in tandem with drop in auto sales and high interest rates.
Passenger car sales in August stood at 8,980 units, reflecting a drop of 50% year-on-year (YoY) and 13% MoM.
Recently, the need for prior permission to import raw materials by the SBP has led to lower inventory levels and slashed production in the auto industry. At the same time, increased auto financing rates due to interest rate hikes have also curbed demand, while high inflation has shrunk purchasing power as well.
“The dip in auto financing comes as overall auto production and sales have declined significantly, amid SBP measures to curb imports of CKD units,” Tahir Abbas, Head of Research at AHL, told Business Recorder.
Meanwhile, demand for automobiles has also dropped as the interest rate remains high, while the overall economy remains in a slowdown, said Abbas. He shared over 25% of auto sales come through auto financing.
“This is expected to decline further in the coming months,” said Abbas.
Moreover, central bank data showed that loans for house financing clocked in at Rs206 billion in August, an increase of 84.4% YoY and 2.3% MoM, which is mainly due to a rise in house prices, thus increasing the financing requirement, shared Abbas, adding that home financing would stabilise in the coming months.
Meanwhile, financing for personal loans stood at Rs250.76 billion, up by 5% YoY, however, on monthly basis, it remained flat.