The amount of outstanding auto financing declined for the eighth consecutive month at the end of February, data released by the State Bank of Pakistan (SBP) showed on Tuesday.
At the end of February, it was at Rs326 billion, down 8.6% or Rs31 billion from the previous year. The most recent amount owed on auto loans is 1.8% less than it was in January 2022, when auto loans reached Rs332 billion.
Analysts highlighted a variety of factors, including recent significant price increases by automakers, skyrocketing interest rates, closures of various assemblers’ plants, and automakers’ difficulties to obtain Letters of Credit (LCs) opened by commercial banks, to the continuing downward trend.
In Pakistan, demand for low-end, price-sensitive vehicles fell dramatically in February as a result of supply chain difficulties and increased automobile prices.
Auto financing portfolio drops for fifth straight month
The overall sales of cars, vans, trucks, and light commercial vehicles posted a 73% YoY decrease in February to 5,762 units, according to data released by the Pakistan Automotive Manufacturers Association (PAMA) last week. This was the lowest monthly sales number since 4,500 units were recorded in May 2020.
The development comes at a time when the auto sector, which depends heavily on imported parts and materials to manufacture automobiles at local plants, is dealing with severe supply chain problems caused by fluctuating exchange rates and diminishing foreign exchange reserves.
The government has had to impose limits on the opening of LCs for several sectors, including the automotive industry, due to the low level of foreign exchange reserves.
