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ISLAMABAD: Pakistan’s local automotive industry has issued a serious caution to the government: if import duties on vehicles are slashed without a well-defined and long-term policy in place, domestic manufacturing could collapse in favour of increased reliance on imported cars and components.
This warning emerged during a key consultative meeting chaired by Special Assistant to the Prime Minister, Haroon Akhtar Khan, as part of the ongoing discussions on the National Tariff Policy (NTP) 2025–30, scheduled for rollout on July 1, 2025.
Representatives from the Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) and the Pakistan Automotive Manufacturers Association (PAMA), along with officials from the Ministry of Industries and Production and the Engineering Development Board (EDB), participated in the high-stakes session.
While the upcoming policy aims to remove trade barriers, reduce Regulatory Duties (RDs) and eliminate Additional Customs Duties (ACDs), auto industry stakeholders remain alarmed, especially over proposals to lower import duties to 15% by 2030.
Industry leaders argued that such a dramatic drop in duties would dismantle incentives for local production.
“If cars are imported at 15 percent duty, auto parts would naturally be imported at 0 to 10 percent. That completely undercuts local production,” warned Abdul Rehman, Chairman of PAAPAM.
He stressed that Pakistan’s local manufacturers already face challenges like high electricity tariffs, costly raw materials such as steel and plastic, and elevated financial borrowing costs, leaving them unable to compete with regional heavyweights like India, China, Thailand, or Vietnam.
Protection Gaps and Pricing Dilemmas
The auto sector also highlighted inconsistencies in current duty structures. PAMA revealed that the government taxes Completely Built Units (CBUs) between 50% and 100%, depending on the vehicle category, while it provides only 18% protection to local parts manufacturers against Completely Knocked Down (CKD) kits. CKD import duties stand at 15% for motorcycles and a mere 1% for tractors.
Despite some Original Equipment Manufacturers (OEMs) claiming up to 60% localisation, prices of vehicles in Pakistan remain steep and largely unaffordable for the average consumer.
Industry Urges Policy Consistency
The industry has reiterated the need for a stable and predictable policy framework, especially to secure long-term investments and encourage localisation.
“The government needs to issue a clear and consistent policy,” said Abdul Rehman. “Every two to three years, we face policy reversals or ambiguity, making it impossible to plan long-term.”
In response to a prior request by the SAPM, PAAPAM submitted a detailed analysis of all taxes and duties impacting local auto part manufacturers. This presentation is now with the EDB, which is preparing a formal report for the Ministry of Industries in the coming days.
