Pakistan Auto Loans Hit Record Despite Slump in Sales

News Desk

KARACHI: Outstanding auto loans in Pakistan climbed for the 22nd consecutive month to reach Rs407 billion in September, defying an ongoing slowdown in domestic automobile sales, according to the latest figures released by the State Bank of Pakistan (SBP).

The portfolio expanded from Rs393.3 billion registered in August, highlighting resilient consumer appetite for retail vehicle credit even as manufacturing dispatches face market headwinds.

The continuous growth in financing contrasted sharply with assembly floor performance. Industry statistics reveal that sales of passenger cars, sport utility vehicles, pickups, and vans fell 12 percent year-on-year and 3 percent month-on-month to 15,104 units in September.

Market analysts attributed the immediate slump to protracted regulatory delays surrounding the federal government’s new auto policy, alongside weeks of fiscal ambiguity regarding general sales tax (GST) rates on hybrid electric vehicles, which authorities eventually revised down from 25 percent to 18 percent for engines up to 2,000cc.

Cumulative auto sales nevertheless rose 19 percent to 50,480 units during the first quarter.

Market observers emphasize that the trajectory of car financing remains inextricably linked to monetary conditions and commercial banking spreads.

Mohammed Sohail, Chief Executive of Topline Securities, noted that while auto financing is poised to continue an upward trend, the pace of expansion is likely to decelerate due to lingering regulatory overhang and rising borrowing costs.

The benchmark Karachi Interbank Offered Rate (KIBOR) has edged upward in recent weeks, even though the central bank’s Monetary Policy Committee maintained the policy rate at 11.5 percent during its mid-September session.

Looking ahead, commercial lenders are expected to apply tighter credit evaluations as retail borrowing costs realign with broader macroeconomic liquidity.

Meanwhile, auto manufacturers and prospective buyers remain focused on the Ministry of Industries and Production to unveil the finalized auto development policy, which is critical to stabilizing production costs, defining taxation regimes, and sustaining long-term consumer demand.