Automotive sector sees 46.7% rise

Declining interest rates, new financing options boost sales; tractors' struggle continues

KARACHI:

Passenger car sales gained momentum, rising to 30,625 units in the first four months of the current fiscal year a 46.7% increase compared to the same period last year. This growth is attributed to improving economic conditions following gradual and continued decreases in interest rates.

According to the car sales data released by the Pakistan Automotive Manufacturers Association (PAMA) on Monday, sales of trucks and buses surged by 82% to 1,074 units and by 66.4% to 203 units respectively. Sales of jeeps and pick-ups went up by 60% to 10,068 units, while two and three-wheeler (motorbikes and rickshaws) sales increased by 23.4% to 457,880 units as usual.

However, once again, tractor sales fell prey to a significant decrease by 59.9%, to 6,939 units, despite the country's diverse agrarian economy in rural areas.

Auto Sector Analyst and Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) former chairman Mashood Khan said sales of passenger cars, trucks, buses, jeeps and motorcycles are going up during the last four months of the fiscal year except for the farm tractors.

The tractor industry is struggling, with sales sharply declining to approximately 7,000 units following policy changes introduced in the 2024-2025 federal budget, although the government is working to address issues in the industry, including resolving sales tax challenges. "We hope for the best, the performance of this sector will gradually improve in the upcoming quarter of the financial year," Khan said.

Overall state of the auto industry is improving owing to the fact that the State Bank of Pakistan (SBP) has gradually reduced interest rates, which has boosted confidence among customers and investors. Car leasing is expected to regain some traction in the market. Some Original Equipment Manufacturers (OEMs) have introduced interest-free financing, attracting customers, and this initiative is already showing promising results.

The local market is poised to expand significantly, as there is ample room for improvement. While this year is far better than 2023 which was one of the toughest years for the entire industry, hindered by high interest rates, economic challenges, and political instability. A recent auto show held in Lahore showcased a variety of electric vehicles (EVs) sparking considerable interest among consumers, particularly within the upper and upper-middle classes. However, Khan pointed out that EVs remain financially out of reach for much of the middle class, despite their popularity among wealthier consumers.

Khan expressed cautious optimism regarding the industry's growth targets, stating, "While the economy is showing signs of improvement, it is unlikely that we will achieve the target of selling 250,000 units by June 2025. However, we expect to reach approximately 125,000 units." Meanwhile, Topline Research said in a report about the car sales that this increase is primarily driven by improved auto financing and a general sense of optimism and stability in the market. Auto sales are expected to rise further as interest rates decline and new models, especially hybrid electric vehicles (HEVs) and EVs, enter the market.