Pakistan is preparing a major change in its automobile industry as policymakers consider much higher export targets for carmakers and auto parts manufacturers under the proposed Automotive and Auto Parts Manufacturing Policy 2026–31.
The new framework could push local manufacturers beyond Pakistan’s domestic market. Instead, the government wants the industry to compete internationally, increase local value addition and connect Pakistani auto parts manufacturers with global supply chains.
An inter-ministerial committee headed by Federal Minister for Power Sardar Awais Ahmad Khan Leghari has proposed major changes to the draft auto policy. The committee has agreed on seven broad principles that could guide the automobile sector during the next five years.
One of the biggest proposed changes involves mandatory exports for original equipment manufacturers, or OEMs. The framework would link export performance with legally enforceable targets and penalties for companies that fail to meet their obligations.
Under the proposal, car, jeep and SUV manufacturers would gradually increase exports from zero in 2026–27 to 12% of their factory-gate production value by 2029–30. The 12% target would continue into 2030–31.
The proposed export values show how ambitious the plan could become. Carmakers could face an export target worth about $160.89 million in 2027–28. This could increase to $347 million in 2028–29.
Moreover, the target could jump to about $558.2 million in 2029–30. It could then reach approximately $596.1 million during 2030–31.
The proposed new auto policy does not focus only on passenger cars. It also sets ambitious targets for tractors, motorcycles and rickshaws.
Tractor manufacturers could see their export requirement increase from 5% in 2026–27 to 15% by 2030–31. Similarly, motorcycles and rickshaws could move from zero to a 15% export target during the policy period.
According to the projections reported from official documents, mandatory OEM exports could generate around $2.391 billion cumulatively over the five-year period.
However, auto parts manufacturers could play an equally important role in Pakistan’s new export strategy.
The proposed framework estimates auto parts exports at around $240 million during 2026–27. Policymakers expect this figure to rise steadily and reach about $700 million by 2030–31.
Cumulative auto parts exports could reach approximately $2.195 billion during the policy period if manufacturers achieve the projected figures.
Combined exports from OEMs and auto parts manufacturers could therefore reach around $4.586 billion between 2026 and 2031.
Annual combined exports could increase from approximately $257.44 million in 2026–27 to about $1.581 billion in 2030–31.
The numbers reveal a major change in direction for Pakistan’s automobile sector. For decades, local manufacturers have largely focused on supplying the domestic market while depending heavily on imported components and tariff protection.
The proposed new auto policy seeks to change that model.
Instead of relying heavily on protection from imports, policymakers want manufacturers to improve efficiency, increase local value addition, upgrade technology and compete in international markets.
The government has already signalled that exports will play an important role in Pakistan’s broader economic strategy.
In August, Federal Minister for Planning Ahsan Iqbal urged the automotive industry to set five-year export targets. He said the sector should move beyond serving only Pakistani consumers and become part of the country’s export economy.
The automotive sector could also contribute to Pakistan’s broader $63 billion export target under URAAN Pakistan.
However, manufacturers have raised concerns about the costs of producing vehicles and components in Pakistan.
The Pakistan Association of Automotive Parts and Accessories Manufacturers, or PAAPAM, recently proposed its own tariff structure for the upcoming policy.
The association wants stronger protection for locally manufactured parts while seeking lower or zero duties on important raw materials.
PAAPAM has argued that Pakistan’s auto parts sector could eventually achieve around $1 billion in exports if policymakers provide appropriate support.
The association has also proposed cheaper financing for component exporters. Moreover, it wants authorities to reduce the export threshold for manufacturers seeking exporter status from 80% to 25%.
PAAPAM has suggested gradually increasing export requirements over a period of five to 10 years.
The organization also wants the State Bank of Pakistan to extend the export realization period from 180 days to 365 days. It argues that engineering products require longer research, development and contract cycles than many other export products.
Meanwhile, research from the Pakistan Institute of Development Economics has also highlighted Pakistan’s weak position in global automotive supply chains.
PIDE says automobile and auto parts exports remain limited despite decades of efforts to develop local manufacturing. It has therefore recommended shifting greater export attention toward the auto parts industry rather than relying mainly on passenger vehicle exports.
This approach could create an important opportunity for Pakistani component manufacturers.
Global vehicle companies rely on complex international supply chains for components ranging from basic mechanical parts to electronics and high-value engineering products.
If Pakistani companies can meet international quality, safety and certification standards, they could potentially supply components to manufacturers outside Pakistan.
However, export targets alone may not guarantee success.
Local manufacturers will need competitive electricity prices, affordable financing, reliable logistics, modern machinery, skilled workers and internationally recognized quality standards to compete with established suppliers from countries such as China, Thailand, Turkey, India and other major automotive manufacturing centres.
Consumers could also feel the impact of the proposed policy.
The committee wants to increase competition, gradually reduce automobile tariffs and promote new energy vehicles. Policymakers hope these changes can eventually improve vehicle affordability while forcing manufacturers to become more competitive.
However, the transition could create pressure on companies that currently depend heavily on tariff protection or imported components.
The proposed Automotive and Auto Parts Manufacturing Policy 2026–31 therefore represents more than another set of targets.
It signals an attempt to change the basic direction of Pakistan’s automobile industry from an import-dependent, domestically focused sector toward an industry that can manufacture more components locally and sell Pakistani automotive products abroad.
Whether manufacturers can meet these ambitious targets will depend on the final policy, implementation and Pakistan’s ability to remove structural barriers facing exporters.
For now, the figures remain part of the proposed framework rather than final proof of future exports. However, if Pakistan successfully reaches the targets, annual automotive and auto-parts exports could cross $1.5 billion by the end of the policy period.
That would mark a significant change for an industry that has historically depended far more on Pakistan’s domestic consumers than international buyers.
