Mansoor Sadiq

Following import curbs, rupee depreciation and high-interest rates, automobile financing witnessed a significant decline in Pakistan. Mounting interest rates have made it difficult for consumers to buy new vehicles. Constantly increasing prices of vehicles by all the leading car assemblers also caused decline in demand for new vehicles significantly. The fiscal year 2022-23 turned out to be one of the worst years for the auto industry as sales of all the leading car assemblers witnessed an average reduction of 56%. Abdul Waheed Khan, a senior representative of Pakistan Automotive Manufacturers Association (PAMA), said while talking to WealthPK that auto loans play a major role in car sales in the country.

He said the demand for auto loans has declined significantly because of the State Bank’s enhanced requirements and increasing interest rates. Waheed pointed out that restrictions imposed by the central bank on the imports of complete knocked down (CKD) kits and auto parts slowed down the sales of auto industry. He said a significant increase was witnessed in the prices of automobiles following exchange rate depreciation. Umar Zahid, an automobile dealer from Islamabad, pointed out that irrespective of sales declines of all the leading car assemblers, they are not too keen to localise the automobile sector, which can help cut the import expenses.

He said the prices of automobiles cannot be suppressed even during the coming years, until and unless the auto industry adopts localisation. He said all the leading car assemblers are heavily dependent on imported auto parts, which is a huge burden on import bill. As per the State Bank’s recent report, the amount of auto loans by different financial institutions reached Rs75 billion by the end of fiscal year 2022-23. On the other hand, with decline in car sales, the country’s automotive industry has laid off thousands of employees during the recent months. The situation for the auto industry is alarming as the ratio of buyers has considerably decreased. Many leading auto manufacturers have shut down their plants owing to increased cost of production and reduced sales.

Credit: INP-WealthPk