Auto financing slides by 0.7%
During the meeting, the chairman emphasised the need for recovery of the arrears. PHOTO: file
Auto financing posted a third consecutive monthly decline in September, 2022.
In the month under review, the figure is down by 0.7% (Rs2.4 billion) against August 2022 to reach Rs350 billion, according to research by Arif Habib Limited (AHL).
“The month-on-month slowdown in car financing can be attributed to higher financing cost, lower purchasing power, slowdown in rural economy and significant delays in car deliveries,” explained Insight Securities Auto Sector Analyst, Asad Ali.
Speaking to the Express Tribune, Head of Research at AHL, Tahir Abbas noted, “Lower demand due to floods negatively impacted the agriculture sector. This, coupled with the overall economic slowdown was the main reason for depressed financing.”
“The State Bank of Pakistan (SBP) restrictions on the import of completely knocked down (CKD) spare parts is resulting in lower production. SBP has also tightened terms for auto financing. Higher car prices, amid currency devaluation, is another reason for decline in financing,” he added.
Topline Securities Deputy Head of Research, Sunny Kumar said, “The month-on-month slowdown in auto financing is due to high interest rates and lower car volumes.” “We will see that this month-on-month decline in car financing will continue,” predicted Kumar.
“To recall, car volumes during the first quarter of 2022-23 were also down by 50% year-on-year due to the non-availability of CKD parts,” he added.
Ismail Iqbal Securities Auto Sector Analyst, Muqeet Naeem said, “Auto financing continues to decline as interest rates have peaked at 15%. This discourages people to opt for car financing.”
“Moreover, price hikes due to the massive devaluation of the rupee against the dollar also reduced the buying power of customers,” he further explained.
Auto Analyst Arsalan Hanif also blamed low production for the decrease, “Auto financing continues to post a decline on a monthly basis due to a slowdown in the production of vehicles resulting in lower sales volumes.”
Auto Expert Mashood Ali Khan dubbed inflation the ‘main culprit’ behind the decline in car financing, “Financially, the middle class of the country has lost its buying power, so nobody can afford to buy a new car at present.” He added that, “Aside from individual purchases taking a hit, even the corporate sector of the country has stopped providing cars to its employees.”
“Until the economic conditions improve, we will not see any improvement in the auto sector that provides employment to a large number of people,” he added.
Published in The Express Tribune, October 20th, 2022.
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