Draft Auto Policy 2026-31 Puts 1.5 Million Jobs at Risk, Warn Parts Makers
Pakistan’s auto parts manufacturers have urged Prime Minister Shehbaz Sharif to review the draft Pakistan auto policy for 2026-31, warning that proposed tariff cuts on imported vehicles could put 1.5 million jobs at risk and undermine decades of local manufacturing.
In a letter dated October 23, the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) told the prime minister that lower duties on completely built-up vehicles, concessions for new-energy vehicles and reduced tariffs on auto parts would hurt domestic producers. The association’s chairman, Abdul Rehman Aizaz, has requested a meeting to present alternatives before the policy is finalised.
PAAPAM says its members, more than 1,200 companies, sustain 1.5 million jobs, deliver $1.8 billion in annual import substitution and supply Rs700 billion worth of locally made components to assemblers each year.
Importers and local makers pull in opposite directions
The objection exposes a split inside the industry. Importers and businesses that want easier access to foreign vehicles favour lower trade barriers. Local assemblers and parts suppliers fear cheaper imports will erode domestic production and the investments built over decades.
For parts suppliers, the worry goes beyond brand competition. If assemblers can bring in cheaper imported parts and finished vehicles, locally manufactured components may no longer stay commercially viable.
The draft has divided a sector once dominated by Japanese carmakers. Chinese brands, electric-vehicle manufacturers and importers are now pushing in different directions, and companies working across petrol, hybrid and electric technologies want different things from the policy.
A senior official of a Japanese auto manufacturer said the industry was no longer speaking with one voice because the business itself had changed. Every segment wanted a policy that protected its own investment, he said, but the government had to consider the whole industrial ecosystem.
He warned that opening the market too fast could damage local suppliers and employment, while too much protection would keep prices high and discourage competition. What the industry needed, he said, was a predictable policy that encouraged exports, genuine localisation and technology transfer.
What the draft Pakistan auto policy proposes
The draft tries to balance these demands through tariff liberalisation, export obligations and incentives for cleaner vehicles. It sets a target of $6 billion in cumulative vehicle and auto-parts exports by 2030-31, with incentives for companies that meet export targets and penalties for those that fall short.
Proposed sales tax rates stand at 1% for battery-electric vehicles, 6% for range-extended electric vehicles and 9% for plug-in hybrids, subject to final approval. Phased tariff reductions on imports are also on the table.
Supporters say the measures will increase competition and widen consumer choice. Critics reply that lower duties alone will not guarantee cheaper cars for buyers, and that local suppliers could be sacrificed in the process.
Stakeholders agree on one point: the policy’s success will depend on whether its incentives produce real gains in domestic value addition, exports and technology transfer, and whether the rules stay predictable enough for businesses to plan long-term investment.
Why the Pakistan auto policy matters for buyers and workers
For Pakistani car buyers, the stakes are direct. The policy will shape showroom prices, the pace of electric-vehicle adoption and the survival of the local supply chain that employs 1.5 million people. If parts makers are right, cheaper imported cars could come at the cost of domestic jobs. If importers are right, protection has kept cars expensive for too long.
Feature Pakistan has tracked this policy closely. PAAPAM earlier sought a direct meeting with the prime minister before the draft reaches the cabinet, talks between Pakistan and the IMF on the auto policy stalled over objections to the draft, and used-car imports surged to 2,276 units in September, adding to local assemblers’ concerns. The government has also set higher export targets for cars under the new policy framework.
Frequently asked questions
What is the draft Auto Policy 2026-31?
It is the government’s proposed five-year framework for the Pakistan auto policy, covering tariffs on imported vehicles and parts, incentives for electric vehicles and export targets of $6 billion by 2030-31.
Why do parts makers oppose it?
PAAPAM warns that tariff cuts on fully built imported vehicles and lower duties on parts will make local manufacturing unviable, threatening 1.5 million jobs and $1.8 billion in annual import substitution.
