Daily Times

KARACHI: Commercial banks’ increased focus on lending money to car lovers in Pakistan appeared to be the key factor behind historic car sales growth as banks disbursed Rs15.16 billion worth of car loans in first four months of the current fiscal.

Car sales during first four months (July-October) of the fiscal year 2017-18 (FY18) stood at 83,810 units, representing 32 percent growth, compared to 63633 units sold in the same period preceding year.

Similarly, car sales in October 2017 were highest ever recorded in the history of the country where all auto assemblers in the country witnessed a growth of 46 percent in their sales compared with October 2016.

The overall outstanding position of auto financing by commercial banks stood at Rs 165.4 billion by the end of October 2017; while it stood at Rs 127.9 billion by the end of October 2016.

The Pakistan Automotive Manufacturers Association reported that auto sales including cars and LCVs clocked at 23341 units, compared with 15,988 units sold in October, reflecting an impressive growth of 46 percent.

The automobile sector remains fairly exposed to interest rate movements where 40 percent of the automobile sales are financed through borrowing. However, Indus Motor Company (IMC) management noted that the borrowing based sales are lower for them compared to the industry due to the high rural demand which is primarily cash based.

The IMC management said there would be no new cars in the near future. During the analyst briefing, the company’s management quelled the ongoing rumours about the launch of a new model identifying that while discussions had been held on the matter, nothing had been finalised yet.

IMC had also been planning to launch a Diesel Engine Variant in 2018 for the Toyota Fortuner line-up where sales growth had been above company expectations.

Industry experts said easy car financing schemes by commercial banks propelled car buying in Pakistan; since car buyers preferred easy payment method instead of focusing on vehicle quality.

“It is a safe option for car lovers to buy a brand new car on instalments instead of purchasing used imported cars even though used Japanese imported cars are far better in quality than locally assembled brand new cars,” said an auto dealer. However, banks also finance used Japanese imported cars indirectly, but many consumers prefer buying brand new cars through banks as they avoid visiting auto showrooms for selection of used vehicles, he added.

Pak Suzuki Motor Company (PSMC) topped the sales chart with volumes depicting 53 percent to 13714 units in October 2017, compared with October 2016. Honda Atlas Cars (HCAR) recorded 50 percent growth during the month.

Indus Motor Company (IMC) also witnessed double-digit growth during October, with unit sales up 28 percent in October-2017. Toyota Corolla sales rose 7 percent, led by Fortuner and Hilux sales.

Published in Daily Times, November 25^th 2017.