Restriction on non-filers for car buying considerably reduces own money

Restriction on non-filers for car buying considerably reduces own money

KARACHI: The restriction on non-filers to purchase cars during first half of current fiscal year has reduced the delivery time and also reduce the own money for immediate delivery in the grey market.

The State Bank of Pakistan (SBP) in its report for second quarter said that the uncertainty regarding filer versus non-filer issue has unsettled the automobile market.

In the absence of hard data, there is no direct way to isolate the impact of ban on non-filers on car demand from price and interest rate hikes.

However, there are some indicative developments. The market has witnessed a significant reduction in booking and delivery time lag.

“Moreover, rate premiums (own money) for immediate delivery in the grey market decreased considerably in line with reduction in wait times,” the SBP said.

“These two factors reveal, albeit indirectly, the effect of restricting non-filers from buying cars,” it added.

The SBP said that the government relaxed some restrictions on non-filers while jacking up the levies. “This measure is expected to revive the demand for automobile in H2-FY19, especially in the aftermath of government seriousness in implementing the vehicle import policy in letter and spirit,” the SBP added.

The central bank said that the contraction of 3.6 percent in H1-FY19 in the automobile production can be traced back to a multitude of factors. First, the increase in prices of vehicles due to currency depreciation, especially JPY-PKR, that in turn increased the cost of production.

The automobile assemblers passed on the impact of depreciation to the customer.

For instance, car prices jumped up 18.4 percent during CY18, compared to a marginal growth of 4.8 percent seen last year.

Second, an increase in financing cost amid policy rate hikes also had a significant impact on vehicle demand.

Car finance dipped by Rs 9 billion to Rs 11.7 billion during H1-FY19, showing a YoY decline of 43.5 percent.

The rural centric tractors and motorbikes segments showed decline in production by 20.4 and 2.8 percent during H1-FY19, compared to remarkable growth of 52.9 and 18.8 percent a year earlier.

The fall in these categories reflects the state of rural economy, which has been hurt by lower kharif production this year. Similar to cars and jeeps, increase in price also contained demand.

While the bus segment recouped some of earlier losses in production level from the previous year, production of trucks and light commercial vehicles (LCVs) declined significantly.

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