Auto financing remains stable in November – Journal

KARACHI: Bank financing for automobiles jumped 42% year-on-year to reach Rs 349 billion in November. However, month over month it increased by a measly 1 pc, data released by the State Bank of Pakistan (SBP) showed on Monday.

“This is the smallest monthly increase after July 2020 when it stood at 215 billion rupees,” said Arsalan Hanif of Arif Habib Securities, attributing the slowdown to changes made by the SBP to prudential regulations regarding funding. automobiles announced the last week of September.

He said the auto market had started to feel the effects of the SBP’s prudential regulations aimed at squeezing demand for automobiles and lowering the import bill to support the balance of payments. However, he said the real impact of the SBP decision would be more visible from January next year, as currently car deliveries are underway and were booked three to six months ago.

He said raising interest rates to 9.75% from 7% in September had also made many buyers cautious.

Year on year, it jumps 42% to 349 billion rupees

According to data from the Pakistan Automotive Manufacturers Association (PAMA), car sales fell to 15,351 units in November, from 17,413 units in October and 18,971 units in September. However, overall 5MFY22 car sales jumped to 90,303 units from 55,779 units during the same period last year.

Total sales of jeeps also fell to 1,016 units in November from 1,251 units in October, while total sales of pickup trucks edged down to 2,347 units from 2,360 units in October.

Mr Arsalan said the SBP’s prudential regulations for consumer finance would not apply to locally made cars under 1000cc and locally made electric vehicles because the government wanted to protect purchases from low to low income groups. medium while promoting the use of clean energy.

Some of the key decisions of the SBP were to reduce the maximum term for auto finance from seven to five years, increase the down payment for auto finance from 15% to 30%, and reduce the maximum term for an auto finance. personal loan from five to four years.

The maximum debt ratio allowed to a borrower had been reduced from 50% to 40%, while the overall auto finance limits used by one person from all banks / DFIs, in total, would not exceed Rs3m at any time.

A locally assembled authorized car dealer said he spoke to various banks where officials said the processing of an auto finance application declined by 40 to 50% as of October, while showrooms are also face the same situation where buyers arrive for car reservation through bank auto finance.

The government also plans to control the growing import bill by increasing tariffs on luxury items, including fully built cars (CBUs), followed by a higher federal excise tax on locally manufactured cars in the mini. -budget.

Umair Naseer of Topline Securities said that increasing regulatory fees on CBUs will drive up car prices and may result in reduced demand for imported CBUs by new entrants.

Posted in Dawn, December 21, 2021

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