- Factors for the decline include massive hike in car prices, soaring interest rates and plant shutdowns of various assemblers
The amount of outstanding auto financing declined for the eighth consecutive month at the end of February, data released by the State Bank of Pakistan (SBP) showed on Tuesday.
The amount stood at Rs326 billion at the end of February, registering a year-on-year decline of 8.6% or Rs31 billion. The latest outstanding auto financing figure is 1.8% lower than its January 2022 level, which witnessed auto financing of Rs332 billion.
Experts attributed a number of factors to the ongoing declining trend including a massive hike in car prices by automakers in recent months, soaring interest rates, plant shutdowns of various assemblers, and the inability of automakers to get Letters of Credit (LCs) opened by commercial banks.
At the same time, demand for price-sensitive low-end cars in Pakistan dropped significantly in February amid supply chain issues and rising vehicle prices.
According to data released by the Pakistan Automotive Manufacturers Association (PAMA) last week, the overall sales of cars, vans, pickups and light commercial vehicles posted a 73% YoY decrease in February to 5,762 units, the lowest monthly sales number after 4,500 units recorded in May 2020.
The development comes as the auto industry, heavily reliant on imported parts and materials to assemble vehicles at local plants, faces immense supply chain issues amid exchange rate volatility and depleting foreign exchange reserves.
The low level of forex reserves has forced the government to place restrictions on the opening of LCs for several sectors including automobile.