Auto loans swell to Rs386bn

Auto loans in Pakistan surged to a record Rs386.3 billion in July, marking the 20th consecutive month of growth, according to the State Bank of Pakistan (SBP). Mashood Ali Khan, an expert in the auto sector, told Dawn that this surge indicates improving consumer confidence and a gradual recovery in automobile demand, noting that the country's low interest rate of 11.5% has contributed to this trend.

Khan suggested that further reduction of interest rates to single digits could spur additional growth in automobile sales and consumer financing. He also proposed increasing the existing financing limit of Rs3 million to Rs6-7 million, particularly for locally assembled vehicles. Khan argued that higher financing limits would provide consumers with better access to loans, thereby supporting the recovery of the formal automobile market.

He added that bringing financing rates into single digits could further enhance vehicle affordability, particularly for middle-income consumers who currently struggle with high prices and financing costs. However, Khan cautioned that auto financing alone is not sufficient to drive industrial growth. He stressed that any progress in automobile financing must be accompanied by localisation efforts, emphasizing the need for a clear and measurable roadmap for all assemblers, especially new Korean and Chinese brands.

The roadmap should include targets for localisation, support for Pakistani vendors, technology transfer, and gradual increases in domestic value addition.