Arif Habib Limited (AHL) recently shared data that shows auto financing rise by Rs. 364 billion in March 2022. This amounts to a Month-over-Month (MoM) increase of just 1.9 percent but reflects a Year-over-Year (YoY) increase of 27.7 percent.
This has been a relatively large rise in car financing in the last 3 months, which implies that the recently hiked interest rate’s influence on car demand is little. Industry analysts had theorized earlier this year that the new regulations of the State Bank of Pakistan (SBP) will restrain the soaring car demand.
The car industry of Pakistan is still enjoying high demand. However, analysts believe that the combination of car financing restrictions and price hikes will likely hurt car sales in the future.
Earlier this month, Muqeet Rehman of Ismail Iqbal Securities (IIS) highlighted that:
Looking at the currency devaluation, further price hikes cannot be ruled out. Continuous price hikes coupled with higher interest rates and limitations on auto financing would likely hurt auto demand in the next fiscal year.
The auto industry sales are yet to show signs of weakening from the price hikes and auto-finance restrictions. The latest wave of price hikes may just begin inhibiting car sales in the next few months.
