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Auto financing in Pakistan continued its upward streak for the fifth straight month in April 2025, reaching Rs263 billion. This reflects a 2% month-on-month and 12% year-on-year increase, signaling a rebound in consumer confidence and demand for both new and used vehicles.
However, this progress is still 28% lower than the peak level of Rs368 billion recorded in June 2022, highlighting that full recovery is still a work in progress.
The recent cut in the benchmark interest rate to 11%, after holding steady at 22% for over a year until June 2024, has made auto financing more attractive. Easier access to credit is gradually boosting consumer purchasing behavior across the automobile sector.
Overall Consumer Credit Climbs
According to the State Bank of Pakistan (SBP), total consumer credit rose by 11.11% year-on-year in April 2025 to Rs891.81 billion, up from Rs801.97 billion in April 2024. On a monthly basis, it marked a 2.07% increase from Rs 873.75 billion in March 2025.
Other segments of consumer financing also posted modest gains:
- House building loans stood at Rs201 billion, showing a 2.39% YoY decline, though a 0.79% MoM increase from Rs199.43 billion.
- Financing for personal use rose by 12.68% YoY and 0.23% MoM, reaching Rs268.29 billion.
Tariff Rationalisation Sparks Industry Anxiety
Amid signs of revival, the auto industry is now grappling with looming uncertainty over the government’s upcoming National Tariff Policy for 2025-30. The proposed policy calls for major reductions in import duties, which has drawn concern from local players.
The Pakistan Association of Auto Parts Manufacturers (Paapam) has cautioned that a maximum tariff cap of 15% under the new framework could harm domestic production. The association warned that such measures may lead to the closure of numerous local firms, potentially endangering up to 500,000 jobs.
In their view, the push for “tariff rationalisation” could jeopardize ongoing recovery in local manufacturing and “expose domestic manufacturers to competition from cheaper imports.”
Private Sector Credit and Sectoral Breakdown
Meanwhile, broader lending to the private sector showed signs of improvement:
- Outstanding credit rose 13.17% YoY to Rs9.49 trillion.
- Loans to the manufacturing sector increased 11.68% YoY to Rs5.37 trillion, though they dipped 1.06% MoM.
- Construction sector borrowing reached Rs216.26 billion, up 10.36% YoY and 1.64% MoM.
- Agriculture, forestry, and fishing sectors received Rs461.15 billion, marking a 19.09% YoY and 0.16% MoM rise.
While auto financing appears to be on a steady path to recovery, concerns from local manufacturers underline the fragile balance between economic liberalisation and domestic industry protection. As the government moves forward with its tariff agenda, all eyes are on how it plans to support local businesses while integrating into global trade dynamics.
