Auto financing in Pakistan has risen for the second consecutive month, increasing by 3.7% month-on-month in October to reach Rs236 billion, up from Rs227.541 billion in September and Rs227.296 billion in August. This growth is attributed to the decline in interest rates, which has improved the affordability of auto loans.
However, despite this positive trend in monthly figures, the outstanding auto loans saw a significant year-on-year drop of 10.7%, according to data released by the State Bank of Pakistan (SBP).
September marked the revival of auto financing after a 27-month hiatus, following a peak in June 2022 at Rs368 billion. High interest rates had previously kept the sector under pressure, but the SBP’s interest rate cuts have provided some relief. The SBP began reducing rates in June, bringing it down to 20% from 22%, followed by further reductions to 19.5% in July, 17.5% in September, and 15% in November.
In terms of vehicle sales, the market has seen a surge. Overall sales of cars, SUVs, vans, and pickups increased by 50% during the first four months of FY25, reaching 40,693 units. Private banks have contributed to this growth by offering competitive fixed rates, alongside local manufacturers providing price discounts.
Plant Shutdowns Amidst Rising Sales
Despite the positive sales figures, Indus Motor Company Ltd (IMC) has announced a second plant closure from November 27 to 29, following an earlier suspension from November 18 to 20. The company cited low inventory levels of raw materials and components, along with ongoing supply chain challenges, which have hindered its ability to meet production requirements. The company had previously suspended operations in July, August, September, and October for similar reasons.
However, IMC reported a strong financial performance for the quarter ended September 30, with a 58% rise in profit after tax (PAT), reaching Rs5 billion compared to Rs3.216 billion in the same period last year. Net sales turnover also increased by 27% to Rs41.6 billion from Rs32.6 billion.
Growth in CKD Imports and Tyre Manufacturing
Data from the Pakistan Bureau of Statistics (PBS) shows a 35% increase in the import of completely knocked down (CKD) kits, which rose to $282 million during July-October, up from $208.5 million in the same period last year. This indicates a strong order book for local assemblers.
Meanwhile, Ghandhara Tyre and Rubber Company Ltd (GTR) announced that it would temporarily shut down its boiler from November 27 to December 2 for planned maintenance work on its utility line. Despite this, GTR assured that plant operations would not be significantly impacted as regional offices remain operational to ensure continued tyre supply.
The overall auto sector remains resilient, with sales continuing to rise despite production challenges, signaling positive prospects for the industry as it adapts to fluctuating interest rates and supply chain dynamics.
