Auto financing rises before tax hike

The significant increase of 19.4% in auto financing seen in the past fiscal year has had a positive impact on car sales.

According to analyst Arsalan Hanif, sales in June alone showed a 106% year-on-year growth in anticipation of increased prices after the imposition of taxes. This highlights the importance of continued investment in the auto industry.

“Auto financing increased marginally in June on a year-on-year and month-on-month basis,” said Muqeet Naeem, auto sector analyst at Ismail Iqbal Securities. “There is no significant growth in auto financing,” he added.

Khan explained that the purchase of a car is not a one-time expense, as there are running costs associated with the vehicle that can be difficult for customers to manage.

“The current figures reflecting the industry’s performance are positive when compared to 2021 and 2020. The true picture will emerge when comparisons are made with the year before the Covid outbreak,” Khan said.

Factors that have started to hurt the industry include high interest rates that have hit the purchasing power of the salaried class.

Due to the depreciation of the rupee, prices have increased significantly. With the introduction of more taxes and the difficulty of opening LCs, it has become more difficult for OEMs to survive. Fuel prices have also increased dramatically, causing great hardship for the people of Pakistan.

“Trust deficit between the government and the industry has widened,” he said. “The State Bank has been without a governor while political uncertainty in the country is pushing the economy and industries towards turmoil.”

He called on the government to sit with the industries and chart the way forward, otherwise the current situation would be catastrophic for the business. At the same time, “the industry needs to brace for the hard times”.