Pakistan’s Car Financing Segment Breaks Another Record

The rapid upsurge of car financing is persisting despite the recent rise in car prices and other concerns such as delayed deliveries, own-money, and the supply chain crisis, etc.

The demand for vehicles in Pakistan is consistently increasing, evident from the auto-financing figures of October 2021, which state that a tremendous new record of Rs. 346 billion has been achieved.

The data shows that auto-financing had a Month-Over-Month (MOM) growth of 2.2 percent and a Year-on-Year (YoY) growth of 43.7 percent. It also indicated that the growth is due to the lowered interest rates on car loans and the recent advent of new automakers and modern cars in the market.

The government seeks to capitalize on this growing demand by ramping up the local annual production of vehicles to eight million units by 2026 through the addition of more clauses to the existing auto policy to offer more incentives to the automakers.

Obstacles

With the recent escalations in the prices of cars and a few more to come, it is being speculated that the demand may be impacted negatively. The government is also trying to discourage vehicle imports by increasing the taxes on imported CBU’s with engine capacities over 1000cc.

A government document detailed that car imports increased by 669 percent between August and October, and sources privy to the matter highlighted a proposal to curb the rising imports of expensive and luxurious electric vehicles (EVs). It recommends the enactment of a 50 percent Regulatory Duty (RD) on the import of EVs with over 50 kWh battery packs, and suggests increasing the RD on vehicles with engine capacities between 1501cc and 1800cc to 50 percent.

Moreover, the proposal recommends 10 percent Federal Excise Duty (FED) on imported vehicles with the same engine capacity and suggests a 10 percent FED increment on locally manufactured vehicles with engine capacities over 1500cc.

Considering these prospective developments, the growth of car financing does not appear to be a constant in the times to come.

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