Auto loans rise despite sales slump

Auto loans in Pakistan have risen for the 22nd consecutive month, reaching Rs407 billion in September, despite a decline in car sales. The State Bank of Pakistan reported that car, SUV, pickup, and van sales dropped 12% year-on-year and 3% month-on-month to 15,104 units in September. This downturn was attributed to uncertainty surrounding the new auto policy and confusion over the general sales tax on hybrid vehicles, which was eventually settled at 18% for vehicles up to 2,000cc.

Despite this sales slowdown, cumulative auto sales for the first quarter of fiscal year 2027 rose by 19% to 50,480 units. Experts anticipate that auto financing will continue to increase, albeit more gradually, due to the influence of interest rates on borrowing costs. With the Karachi interbank offered rate (KIBOR) gradually increasing, the State Bank of Pakistan may raise the policy rate by 50 basis points to counteract prolonged inflationary and external shocks.

Auto financing is expected to improve in November, as the car segment expands due to growing consumer confidence, increased trust in Chinese-made vehicles, the release of new models, and the entry of new brands. Sales appear to be relatively stable in the coming months, given the large influx of semi- and completely knocked-down kits (SKD/CKD) imported by the assemblers.