As Pakistan’s current auto policy approaches its expiry in June 2026, the government is preparing the Auto Industry Policy 2026-31, with the Engineering Development Board (EDB) conducting detailed consultations with vehicle assemblers, parts suppliers, and used vehicle importers. The upcoming framework is expected to align with the National Tariff Policy (NTP), introduced under Pakistan’s $7 billion Extended Fund Facility with the International Monetary Fund (IMF). This policy caps tariff rates on finished vehicles at 15 percent and advocates the removal of concessionary SROs, signaling a shift toward a more market-driven automotive sector.
The government has also allowed the commercial import of used vehicles and is likely to continue baggage and gift schemes for overseas Pakistanis. Local automakers argue that these channels are being exploited for commercial imports, intensifying competition for domestically assembled cars. The rising influx of used vehicles, often undervalued at customs, has become a significant pressure point for the local industry.
A notable divide has emerged between vehicle assemblers and parts manufacturers. Nine out of eleven local assemblers, representing fifteen global brands from Japan, China, and South Korea, have jointly recommended reducing duties and taxes to maintain fair competition with used imports, make vehicles more affordable, and expand the domestic market. Their proposals include capping duties on completely knocked down (CKD) kits and localised components at 10 percent or lower, while eliminating tariffs on safety-related parts. These assemblers contend that over 50 percent of a vehicle’s final price is comprised of government duties and taxes, which undermines affordability and market growth. They argue that localisation efforts should continue only if they strengthen global competitiveness.
On the other hand, two major Japanese assemblers and several parts manufacturers advocate retaining high tariff protection, with rates reportedly as high as 35 percent on localised components. Policymakers have described this protectionist stance as counterproductive, noting that it discourages exports, limits product diversity, and keeps outdated models in circulation. Officials involved in policy drafting have emphasized that prolonged protection for local manufacturers is unsustainable. They have asked long-standing assemblers and vendors to demonstrate how decades of localisation have translated into tangible benefits for consumers. Despite reported high local content in several models, many vehicles remain uncompetitive internationally and fail to meet global safety and emission standards.
According to Topline Securities, Indus Motor Company (IMC) achieves over 60 percent localisation in Corolla, Cross, and Yaris models, while Hilux and Revo models have 40–50 percent localisation. Honda Atlas Cars Ltd reports localisation of over 60 percent for Civic, 73 percent for City, and below 50 percent for BR-V and HR-V. Pak Suzuki Motor Company Ltd, delisted from the Pakistan Stock Exchange in 2024, previously reported localisation of 35 percent for Swift, 51 percent for Cultus, and 62 percent for Alto 660cc. Discontinued models such as WagonR, Bolan, and Ravi had local content of 61 percent, 72 percent, and 69 percent, respectively. Despite these figures, exports from these models have been negligible over the past five years, raising questions about localisation as a sustainable development strategy.
New entrants in the Pakistani market, offering hybrid and plug-in hybrid vehicles with enhanced safety features and export-ready designs, have strengthened the argument for tariff rationalisation and fair competition. Analysts suggest that while the current policy has broken long-standing monopolies and diversified consumer choices, the next phase should prioritize competitiveness and innovation over continued protection for legacy players.
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