Auto sales surge 45% in Pakistan amid lower interest rates

Pakistan’s auto industry is witnessing a record-breaking surge in sales, with cheaper financing and improved economic conditions fueling demand, Kamran Khan said.

According to data from the Pakistan Automotive Manufacturers Association, car sales jumped 45% in July and August compared with the same period last year. Automakers sold 25,093 units in the two months, up from 17,288 in 2024.

The rally in sales is tied to economic stability and a sharp decline in interest rates. Within a year, Pakistan’s policy rate has dropped from 22% to 11%. Auto financing in August hit PKR 294 billion, a 29% annual increase. Several banks are now offering loans below the Karachi Interbank Offered Rate, while some companies are selling vehicles through interest-free installment plans.

But the boom has tilted heavily toward high-end buyers. Kamran Khan noted that luxury SUVs made up 58% of cars sold in the past two months, underscoring the challenges for middle-class families. “For lower middle-income households, buying a small car remains very difficult,” he said.

Once dominated almost entirely by Japanese manufacturers Honda, Toyota and Suzuki, Pakistan’s auto market now includes Chinese, Korean, Malaysian and local assemblers. More than 13 companies are competing, with electric and hybrid models gaining traction. From October, automakers will also be required to meet 40 additional safety standards, bringing the total to 57.

The government, under pressure from the International Monetary Fund, has eased restrictions on used car imports this year, allowing vehicles up to five years old with a 40% regulatory duty. Local assemblers have strongly opposed the move.

Yet affordability remains the most pressing issue. A 660cc compact car in Pakistan now costs about PKR 3.4 million. In neighboring India, a comparable model is priced at the equivalent of INR 450,000. Even after accounting for currency differences, Pakistani buyers are paying significantly more — and often an additional premium for early delivery.

Kamran Khan said the mismatch between soaring sales and unaffordable small cars illustrates the growing divide in Pakistan’s auto sector.