Parts Makers Say New Auto Policy Favours Imports
Pakistan’s auto parts makers say the final auto policy favours imports over local manufacturing, putting nearly 1,200 engineering and component firms at risk. Former Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) president Aamir Allawala said the policy backed imports of completely built-up electric vehicles and completely knocked-down kits instead of domestic production, The Express Tribune reported.
Allawala warned the policy could reverse years of progress in localisation, now estimated at 50% to 65% for several locally assembled models. He said assemblers would find it cheaper to import components from foreign partners than to buy them locally, threatening 300,000 direct jobs and another 1.5 million indirectly linked to the industry.
More vehicle imports would also raise demand for foreign exchange, he said, while tax concessions on imported electric vehicles could widen the Federal Board of Revenue’s revenue gap.
Parts makers had already warned in October that the draft auto policy put 1.5 million jobs at risk. Their new criticism targets the final version of the policy, which the government approved this month with promises of cheaper cars and more electric vehicles.
Auto policy: duty cuts worry parts makers
Former PAAPAM chairman Abdul Rehman Aizaz described the policy as import-centred. He warned that cutting customs duty on completely built-up vehicles to 15% by 2031 would undermine the whole domestic value chain, reaching beyond component makers to material producers such as Aisha Steel, International Steels and People’s Steel Mills, as well as local assemblers.
He questioned how Pakistan could compete when India, Thailand and Indonesia impose completely built-up import duties of around 120%, 80% and 52% respectively, against the proposed 15%. He warned that around 300,000 direct jobs could disappear by 2031 if domestic production became commercially unviable.
Allawala said component manufacturers had not endorsed the policy. He claimed its final version was substantially different from the proposals discussed with the Ministry of Industries and Production up to June 2026. PAAPAM had sought a meeting with the prime minister in October before the cabinet saw the draft, and the Senate was told in October that the five-year policy was near final approval.
He suggested renaming it from the Auto and Auto Parts Policy to the Policy for Automobile Assembly and Import of New and Used Vehicles, arguing that its incentives mainly benefited imports rather than local manufacturing.
Electric vehicles and used cars
Aizaz also raised concerns about concessions for new energy vehicles, particularly the proposed 15% localisation target over five years. He said low import duties on electric vehicles and components could shift manufacturing and employment abroad.
He questioned facilitating commercial imports of used vehicles without an age limit, saying it contradicted the stated aim of reducing carbon emissions. Used car imports have already surged, with 2,276 vehicles reaching Pakistan in September alone.
Allawala argued that consumers, who make up only around 0.1% of the population buying cars each year, might gain a 5% to 7% price reduction. He questioned whether those limited gains justified damage to the wider industrial ecosystem.
Assemblers call the policy a need of the time
Auto expert Mashood Ali Khan said two successive policies covering 2016-21 and 2021-26 had failed to deliver meaningful localisation. He said companies were offered a 25% incentive to establish local manufacturing, but many continued to import components. He questioned how localisation would be achieved when the completely built-up tariff would fall to 15% by 2031, noting Pakistan had already reached around 65% localisation in several categories.
He urged binding localisation requirements for every new model, with at least 10% of components made locally at launch and an annual roadmap for increasing domestic content. He also questioned the $6 billion export target, which envisages equal contributions from parts makers and original equipment manufacturers.
The Pakistan Automotive Manufacturers Association took a different view. It called the policy a need of the time and asked the ministry for an official copy of the policy for its members.
The industry is split: parts makers warn the final policy will hollow out local manufacturing, while assemblers welcome it. The test is whether localisation survives as duties fall towards 15%.
Frequently asked questions
Why do parts makers oppose the new auto policy?
PAAPAM says the policy favours imports of fully built electric vehicles and knocked-down kits over local manufacturing, putting about 1,200 firms and 300,000 direct jobs at risk.
What happens to import duty on fully built vehicles?
The policy cuts customs duty on completely built-up vehicles to 15% by 2031. India charges about 120%, Thailand 80% and Indonesia 52% on such imports.
What is the concern about electric vehicles?
Parts makers say low duties on electric vehicles and components could shift manufacturing and jobs abroad, and the proposed 15% localisation target over five years is too weak.
Why are used car imports part of the row?
The policy facilitates commercial imports of used vehicles without an age limit, which parts makers say contradicts the aim of cutting carbon emissions. Used imports already reached 2,276 vehicles in September.
Do assemblers agree with the parts makers?
No. The Pakistan Automotive Manufacturers Association called the policy a need of the time and asked the ministry for an official copy for its members.
