Pakistan’s automotive manufacturers and auto parts makers have urged Prime Minister Shehbaz Sharif to protect the country’s industry from proposed tariff reductions on imported vehicles, warning the move can trigger deindustrialization, plant closures and widespread job losses.
In separate letters addressed to the prime minister, automakers and the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) called for the automotive sector to be excluded from the proposed tariff reductions under the National Tariff Policy 2026-31 and sought early finalization of a new auto policy focused on localization and vendor development.
Automakers said the proposed reduction in tariffs on Completely Built Unit vehicle imports to 15% would make imported vehicles significantly more competitive than locally manufactured vehicles, undermining domestic production. “We respectfully seek your immediate intervention to protect Pakistan’s automotive manufacturing industry from serious risk of deindustrialization resulting from the proposed reduction in Completely Built Unit import tariffs under the National Tariff Policy 2026-31,” read the letter.
The manufacturers said Pakistan’s automotive sector comprised 31 vehicle brands and more than 100 models, attracting over $5 billion in investment from original equipment manufacturers and auto parts manufacturers during the past three automotive policy cycles. They said the passenger car segment contributes more than Rs. 700 billion annually in tax revenues while supporting direct employment and the livelihoods of nearly 2.5 million people.
However, they said, the industry is currently operating below 50% of its installed annual production capacity of 500,000 vehicles because of repeated policy changes and weak demand. They said imports of around 45,000 CBU vehicles annually already account for nearly 18% of the domestic market.
The letter argued that reducing CBU tariffs to 15% is based on “unrealistic assumptions” regarding exports and competitiveness and would accelerate deindustrialization rather than strengthen the sector. Citing international examples, they said countries such as Vietnam and Thailand continued to protect domestic automotive industries through higher tariff regimes.
The industry warned that failure to exempt automobiles from the proposed tariff reductions could result in the permanent closure of vehicle assembly plants and about 1,324 auto parts manufacturers, jeopardize more than $5 billion in industrial investment and threaten employment supporting approximately 2.5 million people. The letter has urged the government to exclude the automotive sector from the proposed tariff cuts, introduce a stable long-term automotive policy with predictable tariff structures, and maintain at least a 40% tariff differential between imported CBUs and locally manufactured vehicles to encourage investment and localization.
New auto policy
In a separate letter, PAAPAM expressed concern over delays in finalizing the new auto policy, saying prolonged uncertainty has stalled investment decisions, capacity expansion and technology upgrades across the vendor industry.
“The prolonged delay in finalizing the new Auto Policy has created significant uncertainty for our members,” PAAPAM wrote, urging the government to expedite the policy’s completion.
The association said previous auto policies were largely assembly-focused and provided limited support to the vendor industry, which it said accounts for approximately 80% of total employment generated by Pakistan’s automotive sector. It urged the government to adopt a localization-driven policy framework that strengthens domestic parts manufacturing, promotes technology transfer and enhances economies of scale.
The association also requested a meeting with the prime minister to present its recommendations and sought an opportunity to discuss the National Tariff Policy with the government team led by economist Stefan Dercon to ensure the vendor industry’s concerns are reflected in tariff-related decisions.
PAAPAM said it remains committed to working with the government to formulate policies that promote industrialization, import substitution and sustainable employment generation in Pakistan’s automotive sector.