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Pakistan’s automobile assembling industry has experienced a remarkable recovery, with total vehicle sales rising by an impressive 46 percent year-on-year during the first nine months of the fiscal year 2025 (9MFY25). The total number of vehicles dispatched surged to 100,736 units, up from 69,080 in the same period last year, signalling a strong rebound in the country’s automotive sector after several years of stagnation.
Segment-wise Performance Highlights
The most significant contribution to the surge in overall sales came from passenger cars, which saw a substantial increase of 39 percent, with 75,265 units sold compared to 54,089 units during the corresponding period last year. The passenger car market experienced exceptional development during these months as a result of the economic uncertainty and high interest rates that had plagued it in previous years. Product sales, which had previously peaked at 172,612 units in FY22, were reduced to 85,776 units during FY23 due to a business downturn. A market recovery ensued.
The SUV segment sales statistics experienced a significant increase in the 9MFY25 period, reaching 18,388 units compared to 10,997 units in 9MFY24. The sales of SUVs experienced exceptional growth in the 9MFY25 period, reaching 18,388 units in comparison to 10,997 units in the same period of 9FY24.
SUVs are currently the preferred choice among consumers due to their adaptable use capabilities and increased capacity. The SUV segment of the market is expanding at a rapid pace due to the convergence of middle-class growth and household requirements that necessitate versatile automobile options.
The Light Commercial Vehicle category experienced a significant increase in FY25, as the market purchased 7,083 units, a 77 percent increase from its previous sales of under 4,000 units. The demand for light commercial vehicles (LCVs) has increased as a result of the recovery of small enterprises and the strengthening of commercial activity as the overall economy stabilises.
Key Drivers of Growth
The significant rebound in car sales can be attributed to a combination of factors that have improved consumer sentiment and affordability. The three main drivers of this growth are:
- Monetary Easing: The primary cause of the increase in auto sales figures is the decrease in interest rates. The State Bank of Pakistan’s fiscal policies resulted in a decrease in the policy rate from 22% to 13%, which improved the affordability of auto loans. The monetary policy relaxation restored purchasing power for consumers, and net auto loan disbursements were positive for the first time in November, after reaching negative levels in mid-2022.
- Pent-up Demand & “Own Money” Premiums: Intensive consumer interest resulted in a rapid increase in the demand for the Toyota Corolla and Honda Civic, as well as Suzuki Alto, in the market. Buyers elect to pay “own money” premiums, which are supplementary cash payments made to expedite the acquisition of vehicles facing delivery delays of two to three months. Buyers are willing to pay an additional fee to circumvent vehicle delivery delays, which has resulted in an increase in sales figures.
- Prudential Safeguards and Lending Standards: The automobile industry is confronted with stringent regulations that mandate higher payment requirements, a maximum five-year loan term, and finance limitations for imported vehicles that are owned. However, these regulations have not impeded the sector’s development. These measures have contributed to the establishment of a more dependable lending environment and have also encouraged consumers to be more responsible with their borrowing habits.
Outlook for the Sector
Despite the impressive growth, overall volumes remain below the ten-year average and are still only about half of the levels observed in 9MFY22, which saw over 205,000 units sold before the pandemic disrupted the market. Analysts believe that the market will outperform its present levels in the following months due to what appears to be a new route for sector recovery.
Favourable macroeconomic conditions, together with rising consumer confidence and improved lending prospects, will drive future expansion in Pakistan’s automotive sector. Pakistan’s vehicle industry has improved prospects as the economy regains stability and consumer purchasing power increases.
The FY25 auto sales figures were 46 percent higher than prior levels, indicating both sectoral reform and broader market stability and consumer confidence recovery. The revival of demand for passenger cars, SUVs, and LCVs showcases the resilience of the automobile market in Pakistan, and as the year progresses, the sector is likely to experience continued momentum.
