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Thursday, May 23, 2024

Pakistan’s auto financing reaches historic high at Rs308bn in June

Lower cost of borrowing, increased options, and decreased duties by the government have allowed people to buy more cars, and thus increased car financing and car sales in the country. On the other hand, the EV sector of the auto industry is kicking off with MOUs and partnerships being signed between local and international companies.

Car Financing in Pakistan sees a historic high as the number reached Rs308 billion for the month of June. The lower cost of borrowing and the increased buying options for the local people are arguably the two most important factors in this regard.

According to the recently released State Bank of Pakistan (SBP) data, the car financing for the consumers has increased 46 per cent from Rs211 billion worth of borrowing in June of the preceding year. Compared to the latest pre-pandemic period of FY19, car financing saw an increase of 43 per cent in June 2021.

The industry experts have predicted that car sales would increase further due to the incentives offered by the government in the recent budget and the upcoming auto policy 2021.

Another major factor in this is the good policy rate being offered by the government. Despite high prices of locally-assembled cars over the last 18 months followed by late deliveries and high premiums, buyers remained upbeat to cash in on the opportunity of a low-interest rate of 7pc which was 13.5pc in March 2020.

The cars less than 1000cc have been the most focused area of the automobile sector under the upcoming Auto Policy 2021-26, as they are the cars that can be afforded by the majority of the country’s population.

For the local vehicle under 1000cc cars, the additional customs duty(ACD)is now 0 percent. The Federal Excise Duty(FED) is now 0 percent as well.

In the import sector, the additional sales tax fell from 3 percent to 0 percent, additionally the ACD, FED and the regulatory duty have been eliminated too. Along with this, the Sales Tax has gone down from 17 percent to 12 percent.

PM Imran Khan also recently announced that the people who will be buying their first car would be able to get small local or imported cars financed on rather cheaper and feasible terms from the banks.

Pakistan Korea deal

Zi Solar Pvt Ltd, a leading renewable energy solution provider in Pakistan, has reportedly entered into an exclusive partnership with Aeonus Co Ltd, a Korean global leader in renewable energy, to expand the electric vehicle charging infrastructure in Pakistan.

According to the statement, this will pave the way for the deployment of state-of-the-art Korean-manufactured electric vehicles (EV) charging and storage equipment in Pakistan.

Read More: Expectations and hopes of Pakistan from the auto policy 2021-26

This partnership is in line with the government’s plan in the to-be-approved Auto Policy 2021-26 to promote electric vehicles in Pakistan in a bid to fight climate change and to reduce the oil import bill.

It is worth mentioning that the Pakistan Electric Vehicles Policy 2020/25 targets a robust electric vehicle market with a 30 per cent share in local consumer vehicles by 2030.

According to the signed memorandum of understanding, Zi Solar Pvt Ltd will facilitate the establishment of electric vehicles charging infrastructure and Smart Mobility Charging Outlets along with distributing all three levels of fast electric vehicles chargers, including over 50kWDC (level three chargers) and over 7kW AC (level two chargers).

BYD in Pakistan

According to the national media reports, BYD China, the world’s leading electric vehicle manufacturer, has collaborated with Pakistan’s Sapphire Group for market development and manufacturing of electric vehicles in Pakistan.

BYD [Builid Your Dreams] has been the world’s largest electric vehicle manufacturer for the past three years running, in both consumer and commercial/industrial electric vehicles.

The development began in May 2021, when PTI’s minister Hammad tweeted about the development.

He wrote, “As a consequence of EV policy announcement by fed govt, Pak is moving towards electrification of mass transit. BYD, the largest global electric bus manufacturer along with Sapphire group have joined hands to develop market development & manufacturing of electric vehicles in Pakistan.”

Pakistan’s annual import of oil and gas accounts for about 80% of the total bill. “If all 240,000 buses in Pakistan were changed into electric ones, it would save a lot of fuel, and the dependence on imports will be largely reduced. 40-50% of traffic emissions pollution can be lessened,” said Liu Xueliang, General Manager of Asia Pacific Auto Sales Division, BYD.

As the global transport sector is going electric, the incumbent government has geared up to catch up to the trend, which would aid the county’s fiscal load and help fight the global climate change fight.

Read More: Pakistan’s Auto sector sees a 250pc uptick in car sales YoY

However, the charging infrastructure in Pakistan is non-existent, and the energy crisis is a major deterrent to the success of this policy’s implementation.