Car loans increased by 46.8 percent year on year and reached an all-time high of Rs326 billion in August 2021, thanks to low borrowing costs and a low cost of capital.
As reported on Tuesday by Arif Habib Limited, loans obtained by consumers to purchase automobiles increased by 3.8 percent in August 2021 over the corresponding month in the previous year, July. The substantial increase in auto financing “confirms that lower interest rates are motivating people to purchase automobiles while also favoring the sales volume of automobile companies,” said Arif Habib Limited analyst Arsalan Hanif. “Lower interest rates motivate people to purchase automobiles while also favoring the sales volume of automobile companies.”
“We expect this tendency will continue until interest rates on credit reach double digits.” As reported by Taurus Securities, new economy car sales grew 21 percent on a year-over-year basis in the first quarter of this year, while hatchback bookings increased by 48 percent during the same period. Additionally, the purchase of sedans nearly doubled in August, with a 98 percent increase year-over-year in the category.
In contrast, “new luxury passenger car sales decreased by 15%,” according to the report. Automotive financing accounts for 30-32 percent of total automobile purchases in the United States. Because a large proportion of Indus Motor Company’s customers reside in rural areas of the country, the company’s auto financing sales were lower than the industry average. In order to boost the dynamics of the vehicle sector, the government has lately implemented a number of new policies.
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Mashood Khan, an automobile industry specialist, explained that the major goal of the measures is to strengthen the automobile industry by increasing demand for automobiles, in the same way, that other industries such as construction, banking, textile, and chemicals have seen increased demand for vehicles. “These trends are expected to continue through the end of this year.” He characterized the increase in car financing as a positive development for the industry, but he pointed out that there were a number of hurdles to the sector’s ability to function.
Over the next year, the automobile sector will experience problems in maintaining its growth pace, owing to a rise in the cost of manufacturing, an increase in shipping and logistic costs, and delays in the arrival of raw materials, among other factors. His request was to clarify the reduction in additional customs charges on raw materials and components imported by vendors, which the government refused to do.
According to him, “raw material for automotive parts will not only aid in the localization of car parts but will also aid in the expansion of exports from the country.” It was recently announced that the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) and its equivalent in Mexico had signed a memorandum of understanding to pave the way for mutual understanding and cooperation. The local business people, according to him, communicating with the Mexican auto parts organization through the Pakistani embassy in Mexico.
He stated that the memorandum of agreement would be used by the local car parts producers to aid in the development of the local industrial sector. According to Khan, “the ball is in our court today, and we must capitalize on this chance and take full advantage of it by modernizing technology and enterprises.” “A relaxation of government duties, as well as easier access to financing, can help Pakistan’s car sector to grow even more.”
He asked the associations in Pakistan’s automobile industry to reach out to their counterparts in other areas of the world and establish connections with them. Mexico is the world’s sixth-largest manufacturer of passenger vehicles, with an annual production of around 3 million automobiles. “More than 89 percent of the automobiles manufactured in Mexico are exported,” he explained.
