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BackGround
In Karachi, auto financing sustained a continuous decline for the 17th consecutive month as of November, witnessing a 2.6% drop to Rs257 billion. This decline is attributed to the exorbitant cost of financing and a significant increase in car prices over the past 18 months.
Comparatively, auto financing stood at Rs264 billion in October 2023 and Rs340 billion in November of the preceding year. Arif Habib Limited reported a cumulative drop of 30%, amounting to Rs111 billion, over the past 17 months, reaching its peak at Rs368 billion in July 2022.
The trend of decreasing auto financing may persist until January or March 2024, anticipating the central bank’s first cut in its benchmark policy rate, currently at a record high of 22%. Consumers are likely to resume auto financing requests after this rate reduction, as purchasing cars at rates significantly higher than the central bank’s policy rate is currently impractical.
Decline in Auto Financing
The majority of consumers are postponing auto financing decisions, anticipating a reduction in the policy rate, which was escalated by the central bank to curb inflation. The policy rate, around 7% in September 2021, spiked to 22% in June 2023.
Furthermore, government restrictions on the auto sector, including limitations on the import of auto parts due to low foreign exchange reserves and foreign debt repayment pressure, have led to a surge in car prices and a notable decline in auto sales.
The analyst highlighted that the auto financing share in total car sales, which historically hovered around 35%, has plummeted to just 5-10% amid high inflation and economic slowdown.
Sales Figures
A 5% MoM growth in Pakistan’s car sales in November, reaching 6,500 units. However, this marked a 65% YoY decline. When including non-PAMA members, car sales totaled 7,700 units, reflecting a 6% MoM increase and a 60% YoY decrease.
In the first five months of the current fiscal year, PAMA members recorded 33,638 car sales, a 50% YoY drop from 67,104 units in the same period last year. Sales for Pak Suzuki Motor Company and Indus Motor declined 8% and 9% MoM, respectively, due to plant shutdowns caused by inventory shortages.
Hyundai Nishat Motor recorded sales of 532 units, up 21% YoY and 41% MoM, primarily attributed to the sale of its commercial pickup truck, Hyundai Porter.
Bike sales in Pakistan fell 13% MoM and 20% YoY in November 2023. Atlas Honda recorded sales of 76,000 units, down 16% MoM and 18% YoY.
The total industry sales of 459,000 units in the first five months of FY24 marked a 12% YoY decrease due to higher bike prices and low purchasing power.
In tractor sales, Al-Ghazi Tractors experienced a 68% MoM decline to 701 units, while Millat Tractors recorded a 6% MoM decrease to 2,809 units. Total tractor industry sales in five months reached 20,806 units, up 98% YoY.
Sales of trucks and buses dipped 20% MoM and 57% YoY to 147 units in November, resulting in a five-month industry sales decline to 877 units, down 47% YoY.