Interest rates in the country are falling and registered a down of 200bps in last 5 months. As a result, lending, especially car financing, is gradually increasing and currently stands at around 25% compared to 70% in 2003-07 and 5% in 2008-12.

According to experts, it may not reach to levels that were seen 10-years back because of relatively stringent rules and regulations of banks now but it is expected car financing can reach 40-50% of cars sold.

Besides locally assembled Japanese cars, used and imported cars are also sold in Pakistan. On an average, local assembled cars make up 75%, while used imported cars are 25% of total sales. Imports of used vehicles have declined by 52% to 23,484 units in FY14. To recall, Govt. relaxed age limit of used imported cars from three to five years in Feb 2011 and amnesty scheme for smuggled cars was also introduced in April 2012. This decision caused a huge influx of used imported vehicles in the local market which affected local sales in FY13 and FY14. The imported figure reveals that major imports of used vehicles were in the category of up to 1000cc (26,525 units in FY13 versus 16,193 units in FY14).

However, after observing significant decline in the sales of local assemblers, Govt. reversed its decision of age limit from five to three years in Dec 2012. Currently, import of used cars is declining due to reduced age limit and increased duties/taxes. This is providing much needed support to the volumetric growth of local auto assemblers particularly to PSMC as major imports were in the category of below 1000cc.

According to data, car sales in March 2015 reached a record of 21,900 units, as Pak Suzuki sold 13,000 units (up 117% YoY), Indus Motor 5,500 units (up 36% YoY) and Honda Atlas Cars 2,400 units (up 22% YoY).

During 9MFY15, car sales are likely to grow 23% YoY to 123,542 units primarily due to the new model of Corolla and Taxi scheme delivery from Feb 2015. INDU is expected to post a significant volumetric growth of 50% followed by PSMC with growth of 20% during this period.

Pakistan has one of the lowest car per thousand of 11 cars providing room for growth with clear signs of economic recovery.Pakistan car sales grew at 5-year (FY10-14) CAGR of 6.6% to 136,888 units. It is estimated that sales of car assemblers will grow at 3-year (FY15-17) CAGR of 10% despite influx of imported used cars (approx. 40,000 cars per annum).