Auto loans hit a record high of Rs 308 billion in FY21
KARACHI: Low interest rates and buyers’ enthusiasm for locally assembled cars lifted auto financing to an all-time high of Rs 308 billion in June 2021, up 3.6% mo. % since June 2020, data released by the State Bank of Pakistan showed on Monday. Total auto finance has jumped 97 billion rupees from 211 billion rupees in June last year, according to figures from the SBP.
Despite the high prices of locally assembled cars over the past 18 months, followed by late deliveries and high premiums, buyers remained bullish to take the opportunity of a low 7% interest rate, which was 13.5% in March 2020.
“The share of auto financing in total car sales is now between 40% and 45% depending on the car model, compared to 15-20% about two years ago,” said Tahir Abbas, head of research at Arif. Habib Limited.
People now have a wide choice of locally assembled cars following the skyrocketing competition between new and old players and the massive slowdown in the arrival of imported used cars, he said. .
“Demand for cars will remain on an upward trajectory over the next six months following lower prices announced by auto assemblers after the federal excise tax (FED) cut by 2.5pc, additional tariffs to 2pc of 7pc and general sales tax at 12.5% versus 17% on vehicles up to 1000cc, ”he predicted, adding that the SBP would likely keep the interest rate unchanged at 7. % in monetary policy which will be announced on Tuesday.
Car sales of members of the Pakistan Automobile Manufacturers Association in FY21 increased 56.7% from 96,455 units to 151,182 units.
Indus Motor Company Limited CEO Ali Asghar Jamali said auto financing is picking up due to very attractive interest rates. “I think the next six months will be very good in terms of car sales.”
About reserving cars under Roshan Apni Car for overseas Pakistanis who have opened Roshan Digital Account (RDA), he said “the response is reasonable.” The inflow of deposits under RDA had crossed $ 1.5 billion, or $ 418 million by January 2021.
Pak Kuwait Investment head of research Samiullah Tariq said a number of people who could not travel overseas due to Covid-19 restrictions preferred to buy new locally assembled vehicles for domestic travel. because they were more fascinated by new models and low interest rates.
He said auto financing in total car sales had doubled to 40%, from 15-20% two years ago.
Posted in Dawn, July 27, 2021