Car Financing Affected by Price and Interest Rate Hikes in July 2022

The inflation and the government’s efforts to discourage auto industry imports have started taking a toll on car demand, as is evident by a recent decline in car financing. As per the latest report, auto financing came in at Rs. 361 billion in July 2022, observing a month-over-month (MOM) decline of 2%. However, on a year-over-year (YOY) basis, it has surged by 15%. Head of Pak Kuwait Investment Company Samiullah Tariq told Dawn that the recent price hikes, soaring interest rates, and loan restrictions on cars with prices over Rs. 3 million have dulled car demand. Head of Research at Arif Habib Limited (AHL) Tahir Abbas echoed the same foresight, stating that car financing will remain slow due to vehicle delivery delays and production cuts. Recently, Pak Suzuki Motor Company (PSMC) announced that it has extended its non-production days (NPDs) from August 22-26. The notification read: A recent report suggests that the State Bank of Pakistan (SBP) is delaying LC approval for CKD imports, which is causing production and delivery delays. These issues caused several major car companies to observe non-production days (NPDs) and cut back on operational costs and adjust as per the ongoing situation. Experts speculate that these steps will further aggravate the industrywide struggles as the import restrictions and ongoing inflation continues to cost car companies thousands of units in terms of sales and billions of rupees in revenue.