PAAPAM Urges PM Shehbaz Sharif to Review Auto Policy 2026–31
Pakistan’s auto-parts manufacturers warn that tariff cuts and incentives for imported vehicles could threaten local production, investment and employment.
PAAPAM calls for a review of Pakistan’s proposed Auto Policy 2026–31 to protect local manufacturing.
The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has urged Prime Minister Shehbaz Sharif to review the draft Auto Policy 2026–31. The association warns that proposed tariff cuts on imported vehicles and auto parts could weaken domestic manufacturing and threaten jobs.
In a letter dated October 23, PAAPAM Chairman Abdul Rehman Aizaz highlighted the industry’s contribution to Pakistan’s economy. He cited more than 1,200 companies, 1.5 million jobs, $1.8 billion in annual import substitution and Rs700 billion worth of locally manufactured components supplied to vehicle assemblers.
PAAPAM has requested a meeting with the prime minister. The association wants to present alternative proposals before the government finalises the policy.
Auto Policy Sparks Industry Debate
The draft policy has exposed differences between importers, vehicle assemblers and local parts manufacturers. Importers and businesses seeking wider access to foreign vehicles support lower trade barriers. However, local manufacturers fear cheaper imports could weaken domestic production and discourage investment.
For parts suppliers, the concern extends beyond competition between vehicle brands. They also worry that assemblers may increasingly rely on imported components if the government reduces duties. Such a shift could undermine the commercial viability of locally manufactured parts.
Pakistan’s automotive sector now faces competition from Chinese brands, electric-vehicle makers and businesses pursuing different technologies. The market once relied heavily on Japanese manufacturers, but changing consumer preferences and new entrants have reshaped the competitive landscape.
Suzuki, Toyota and Honda helped establish Pakistan’s automotive manufacturing base and supplier networks. Their future position will depend partly on how effectively they respond to new competitors and emerging technologies.
Different Technologies Create New Challenges
The industry now spans conventional petrol engines, hybrids, plug-in hybrids, battery-electric vehicles and range-extended electric vehicles. Each technology requires different components, manufacturing capabilities and import arrangements.
These differences have complicated industry lobbying. Some companies operate across several vehicle categories, while others specialise in particular powertrains or components. As a result, a tax concession that benefits one segment may disadvantage another.
A senior official at a Japanese automaker described the growing divisions within the sector.
“The industry is no longer speaking with one voice because the business itself has changed,” the official said.
Traditional assemblers, parts suppliers, importers and electric-vehicle investors now pursue different priorities. The official said the government must consider the entire industrial ecosystem rather than focus on individual companies.
The official also warned against opening the market too quickly. Sudden changes could hurt local suppliers and employment. At the same time, excessive protection could limit competition and keep vehicle prices high.
“The real requirement is a predictable policy that encourages exports, genuine localisation and technology transfer,” the official said. Companies should compete on efficiency and quality without destroying productive capacity built over decades.
Draft Policy Targets $6 Billion in Exports
The proposed policy seeks to balance tariff liberalisation with export commitments and incentives for cleaner vehicles. It sets a target of $6 billion in cumulative vehicle and auto-parts exports by 2030–31.
Under the draft, companies that meet export targets could receive incentives. Those that fall short could face penalties. The proposals also envisage phased tariff reductions and preferential sales tax rates for selected electric-vehicle technologies.
The 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 the remaining approval process.
These measures could widen consumer choice and intensify competition. However, they also raise questions about how quickly the government should liberalise imports and protect domestic suppliers during the transition.
Lower duties may put pressure on vehicle prices, but they will not automatically guarantee savings for consumers. Policymakers must also consider whether local manufacturers can compete with imported vehicles and components.
Conversely, prolonged protection without stronger productivity, exports and localisation could leave the industry dependent on a sheltered domestic market.
Predictable Rules Key to Sustainable Growth
The policy’s long-term impact will depend on measurable improvements in domestic value addition, exports, technology transfer and affordability. The government must also establish clear rules that allow businesses to plan investments over several years.
Frequent changes to taxes and tariffs can complicate investment decisions. A stable framework could help manufacturers assess costs, expand production and develop export markets.
PAAPAM’s request for a meeting places local manufacturing and employment at the centre of the policy debate. The government must now weigh these concerns against its goals of attracting new investment, encouraging competition and accelerating the transition to cleaner vehicles.
The final policy will shape how Pakistan balances affordable vehicles, industrial development and technological change in the years ahead.
