Very evidently, car buyers have gone into what’s starting to look a lot like a prolonged winter hibernation. In the first half of the fiscal year (Jul-Dec), total sales for passenger cars, LCVs, and SUVs plunged by 53 percent; the pie now slashed by half in just one year. For better or worse, this mirrors the state of Pakistani households today; their buying powers are reduced, and their desire to make “lavish” purchases in the form of new cars diminishing.
And lavish they are, as the car market remains fairly unpenetrated by the majority of the population that can simply not afford to buy a car, neither on cash nor on bank financing even if a certain bank was willing to extend them a car loan. Not to mention, maintain and use said car giving the meteoritic rise in petrol and diesel prices. Car owners that had previously bought cars on loans on flexible rates may be regretting their decisions too as interest rates have witnessed their own record rise. Whilst they make hefty car payments, inflation and the growing burden of taxes bring them more despair.
To their credit, policymakers have made tremendous strides in trying to and succeeding in curtailing automobile demand in the market. Along with the rate hikes that have tightened the noose on the entirety of the private sector, SBP made it tougher for car owners to attain financing by slapping restrictions on tenors and equity requirements. That more or less wiped out a significant portion of new car buyers who were to seek auto loans. What remained were cash buyers with savings and investors still willing to put their cash out. Not a lot of them are left out there as cars become more expensive, and supply too remains constrained as LC restrictions loom large for more than a year.
Curiously, as the market pie shrinks, the share of LCVs and SUVs has grown in the total tally—up to 22 percent—as new entrants and new models caused quite the stir (from Hyundai’s Tucson to Sazgar-introduced Haval). But even as this became a revelation, month after month, even that segment is displaying fatigue. There may still be ample cash in the hands of people, but it is clear that they are no longer tying it up in newly assembled cars.
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