A recent report from the State Bank of Pakistan (SBP) has shown a continued decrease in outstanding car finance for the 18th month in a row, indicating a significant change in the country’s auto finance industry. You can find more information about car finance here.

As of December 2023, the outstanding auto loans amount to Rs. 251 billion, which is a continuous decrease from Rs. 257 billion in November and a significant drop from the Rs. 337 billion reported in December 2023.

This represents a 2.3 percent decrease from the previous month and a substantial 25.5 percent decrease from the same time last year. Over the past 18 months, there has been a total reduction of Rs. 117 billion in car finance, a stark contrast from the Rs. 368 billion outstanding 18 months ago.

Multiple factors, such as rising vehicle costs, higher markup rates, and changes in State Bank regulations, have contributed to this decline. Industry experts attribute these factors as the main reasons behind the prolonged decrease in car finance. However, there is hope for an increase in auto financing over the next three months, according to analysts.

Car Sales Decreased by 66% Last Month

According to the latest report from the Pakistan Automotive Manufacturers Association (PAMA), there was a 10% decrease in car sales last month, with 5,816 vehicles sold compared to 6,475 units in November 2023.

When comparing year-to-year data, there was a significant 66% drop, as car manufacturers only managed to sell 17,012 cars during the same period last year.

In addition, two-wheeler sales experienced a notable 7% decrease last month, with 82,362 units sold in December 2023 compared to 88,493 units in November 2023.

Interestingly, ‘Atlas Honda’, a Japanese motorcycle manufacturer, saw a 5% decrease in sales, with 72,096 units sold last month compared to 76,043 bikes in November 2023. Conversely, Pak Suzuki saw a 33% increase in sales, with 1,363 units sold last month compared to 1,028 in November 2023.

Despite the current challenges, stakeholders are optimistic about the industry potentially bouncing back due to a more favorable economic environment and potential changes in car finance structures.