After going through a phase of low sales, layoffs and stressed inventory in the last three years, thanks to low growth in 2018-19 and later on COVID-infested issues, the automobile sector has shown the signs of recovery. The government-led initiatives in the banking sector have triggered buyers’ enthusiasm due to low interest rates by banks for locally-assembled cars. In a recent move, the banks have had to tighten the car financing rules so as to stop the tide of applicants, which was becoming hard for them to manage.
According to the State Bank of Pakistan figures, auto financing has reached Rs308 billion as of June 2021, up by 3.6 percent month on month and 46 percent since June 2020. This is all-time high in recent years as the car financing escalated to Rs97 billion compared to Rs211 billion in June last year.
Similarly, according to the Pakistan Automotive Manufacturers Association, the sales of four-wheel vehicles grew by 59% and amounted to 22,235 units in September 2021, whereas in September 2020, car sales stood at 13,982 units. It is hoped that car assembling plants will bring back the people earlier laid off, and sent on furloughs. The plants remained shut after suffering a dip in sales. The sector is still facing high excise duty on car engines and additional customs duties on imported parts and raw material resulting in an overnight price hike and ensuing contracted sales. Recently, the government eased taxes on car sales and manufacturing, registering a little dip in the car prices. Still prices are high, and buyers are going for locally assembled cars and that is an encouraging report. This will, however, create an influx of cars on roads, which are already going bumper to bumper.