No immediate impact of the SAP measures on car financing, imports – Journal

KARACHI: As assemblers have advance orders for the next four to five months, the recent decision by the State Bank of Pakistan to curb the boom in auto finance and limit vehicle imports will not probably no immediate impact on auto sales.

Auto finance plays a key role in determining auto sales as it accounts for around 30-40% of total sales in the country. The low Kibor rates (benchmark lending rate), which in an upward trend could have a negative impact on auto sales, is a key driver of auto finance.

Auto finance had increased to Rs 326 billion, up 47% year-on-year, as of August 31, 2021. The 6-month Kibor rate stood at 7.54% at the end of August and since then it has increased by 62 basis points at 8.35% as of October 15.

A Korean auto assembler said the impact of the central bank’s decision would not happen until next year, as currently all models are sold out for the next three to four months.

One dealer said the Toyota Yaris will be delivered in two to three months, while the Toyota Fortuner and Corolla models take up to six months if they are booked today. “The situation is so far normal given the already reserved and ongoing delivery of vehicles that had been reserved a few months ago. The market will see the impact after a few months, ”he said.

Another dealership claimed that the booking of Honda vehicles slowed by at least 50% after the SBP decision. However, he said the delivery time for the Honda BR-V and Honda Civic is December and February of next year. Honda Aspire’s delivery time is March next year while other City models will be released to customers by January in case they are booked today.

The head of research at Pak Kuwait Investment Company, Samiullah Tariq, said: “As all models are reserved and funding already approved, I think after three months the automotive market and assemblers will see the impact. of the decision of the State Bank. He said the new funding has been blocked and its impact will be sustainable after three months.

Tahir Abbas, Head of Research at Arif Habib Ltd, was of the opinion that auto assemblers may not see a major short-term sales volume shutdown in FY 22 due to increased demand automobile, backlog and low interest rates as the current automobile delivery time lasts between three and six months.

“I think the SBP’s decision to restrict auto financing will start to impact sales from the start of fiscal 23,” he said.

According to Sherman Research, recent tightening measures for financing locally assembled vehicles larger than 1,000cc and other consumer credit facilities could gradually reduce demand for cars, while lingering problems on the side. of supply could also hamper sales figures, which have started to emerge. by the end of 2021.

The SBP reduced the auto financing period from seven to five years, the debt-to-charge ratio from 50% to 40%, the overall financing limit that a person from all banks can avail themselves of should at no time exceed 3 million rupees, and a minimum drop in the payment for car financing has gone from 15 to 30pc. These measures are applicable to imported vehicles and locally manufactured vehicles with a cylinder capacity greater than 1000 cc.

Umair Naseer of Topline Securities said that out of total car sales, around 49% of sales are over 1,000cc. Honda Car will likely be the most affected by these measures, as auto finance accounts for around 45-48% of their total sales, he said, adding that auto finance accounts for around 25-30% of Indus’ total sales. Motor Company (IMC), the assembler. Toyota vehicles, because 50% of its sales come from rural areas.

On September 20, the SBP raised its policy rate by 25 basis points to 7.25%, citing the increase in the import bill and the current account deficit as main concerns.

Along with rising lending rates, the SBP’s moves to moderate consumer financing do not bode well for the industry, he said.

Posted in Dawn, le 17 October 2021

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