By: T.M Awan
When governments talk about reform, the buzzwords are usually “competitiveness” and “liberalization.” But reforms, if pursued without foresight, can become the very undoing of national industries. Pakistan’s auto sector today finds itself on precisely such a fault line. At stake are not just car prices but millions of jobs, billions in investment, and the credibility of the country’s industrial future.
For decades, Pakistan’s automotive industry has been more than just a cluster of assembly plants. It has been the backbone of our industrial ecosystem. Hosting thirteen global brands, supported by over 1,200 parts manufacturers, and linked to nearly three million jobs, this sector carries a weight far beyond the showroom floor. Nearly five billion dollars have been invested in production facilities, equipment, and technology transfer, while the country has achieved a rare feat: membership of the club of just sixteen nations that manufacture cars, commercial vehicles, tractors, and motorcycles alike.
Yet today, this very achievement stands at risk of unravelling. Under the new National Tariff Policy, the government has announced sweeping cuts in duties on imported vehicles. Customs tariffs, once ranging between 50 to 100 percent, are to be brought down to a uniform 15 percent. Regulatory duties, at present as high as 90 percent, are set for elimination within five years. Additional duties too will be scrapped in four. For car importers and dealers, this is cause for celebration. But for domestic manufacturers, already struggling with currency shocks, high costs, and erratic demand, such liberalization could spell disaster.
Even more worrisome is the decision to allow unrestricted commercial imports of used cars. Globally, no country with established CKD (completely knocked down) manufacturing tolerates such policies because they undercut domestic production. Pakistan’s current allowance for overseas Pakistanis has already been abused for commercial trading; expanding this window further risks turning the domestic market into a dumping ground.
The damage here is not merely industrial. Used car imports are notorious for enabling capital flight through informal channels like hundi and hawala. In the context of FATF compliance, such loopholes expose the country to renewed scrutiny over money laundering and illicit financial flows.
International models offer lessons. In New Zealand, imported vehicles undergo rigorous pre- and post-shipment inspections covering safety, emissions, and odometer tampering, while Australia enforces strict environmental and safety standards before listing any car on its national register. Pakistan, instead of opening floodgates, could adopt a similar framework: certification against UN safety standards, mandatory service and spare part guarantees, and data exchange with exporting nations.
Protecting local industry does not mean closing the door on competition. Fiscal and regulatory tools can balance both. Experts suggest lowering the depreciation rate for taxation from 1 percent to 0.25 percent, capping it at 36 percent, while rationalizing duties on smaller cars to improve affordability. A carbon levy on older imports could simultaneously raise revenues and encourage greener choices. Such reforms would help consumers without dismantling an entire industry.
The challenge, however, goes beyond tariffs. Pakistan’s auto sector already suffers from inconsistent policies and high taxation, which have placed even entry-level cars beyond the reach of the middle class. Meanwhile, the global automobile industry is undergoing its greatest transformation in a century: the electric vehicle revolution. China, with its cost-effective EV models, is rapidly capturing international markets. Pakistan cannot afford to stand unprepared. Incentives for EV adoption, announced by the government, are welcome. But these must be tied to a broader industrial policy that safeguards local capacity while preparing for the transition to new technologies.
The Pakistan Automotive Manufacturers Association (PAMA) has voiced two demands that deserve attention: retaining regulatory duties to shield local producers and banning unrestricted commercial imports of used cars. Beyond that, industry stakeholders emphasize gradual tariff reduction, predictable policies, and incentives for innovation.
The real debate here is not about resisting globalization but about managing it with wisdom. Nations like South Korea, Thailand, and China built their auto industries by liberalizing gradually—only after their domestic sectors had matured. Pakistan is not there yet. Abrupt tariff cuts and open-door imports could wipe out three decades of progress, deter investors, and displace millions of workers.
Pakistan’s auto industry stands at a crossroads. The decisions made today will determine whether this sector becomes a pillar of industrial strength or a casualty of policy haste. Protecting domestic capacity, pacing reforms, and integrating EV policy with industrial safeguards is not protectionism. It is pragmatism—the kind of pragmatism that secures jobs, sustains investment, and positions Pakistan to compete in a rapidly changing global market.
