Pakistan’s car financing reaches all-time high of Rs285 billion

The increase in demand is hugely attributed to a stark decrease in the cost of borrowing as the government slashes the interest rate to 7 percent from 13.5 percent last year.

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Increased demand for automobiles in the country has led to a significant increase in the value of car finance given in March 2021, compared to previous years. According to the data released by the State Bank of Pakistan, car financing saw an increase of 30 percent in March 2021, Year-on-Year (YoY) compared to March 2020. This translates to an increase of Rs66.1 billion.

Topline Securities also went on Twitter to further expand on the figures and informed that the Month-on-Month increase compared to February 2021, was 4.5 percent or Rs12 billion. The financing reached Rs285 billion, breaking the previous record of Rs273 billion.

National news agency Dawn reported that Muhammad Sohail, director of Topline Securities on Monday said that the auto financing had hit an all-time high of Rs273 billion on 28 February 2021. He said a big factor for this increasing demand is the low-interest rate of 7 percent this year compared to 13.5 percent in March 2020.

This low interest is an incentivizing factor as it decreases the cost of borrowing from the Bank, increasing the investment in the economy, and more borrowing by the consumers.

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According to Mr. Sohail, half of the country’s car sales rely on car financing. He also pointed out that at such high prices, the locally assembled cars only attract the upper-middle-class rather than the lower-middle class of the country.

This points out the fact that the real income of people does not allow for the increased prices of the automobile sector of Pakistan. This is synonymous with the fact that the sales are not back to the pre-2018 era when the dollar was much weaker compared to today, and buying the imported vehicles was much lighter on the pocket.

According to the data released by the Pakistan Automotive Manufacturers Association (PAMA) on 13th April, car companies sold 20,801 units in March 2021 compared to 6,986 units dispatched in March 2020, registering YoY growth of 197.8 percent.

According to the data released, the increase in car sales of 31.5 percent came as cars sold in the current fiscal year climb 26,914 from 85,330 units sold in the same period in last fiscal year to 112,244 cars sold in 9MFY21.

It must be noted that on a month-on-month basis, March saw a 27 percent increase in auto sales. This may be attributed to a higher number of working days in March compared to the preceding month.

Read More: Car sales in Pakistan explode in March 2021 compared to last year


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