Indus Motor Company expects growth in Pakistan’s automotive sector to moderate in fiscal year 2026-27 as delays in announcing a successor to the expired automotive policy create uncertainty over production planning, investment and industry growth, according to key takeaways from the company’s annual report.
Pakistan’s automotive market currently offers consumers access to 31 brands and more than 100 locally assembled models across major vehicle segments, reflecting increasing competition and product choice, the company said.
Indus Motor, which assembles Toyota vehicles in Pakistan, reported a 33% year-over-year increase in total sales, including completely knocked down and completely built-up units, to 45,035 vehicles. Passenger car sales rose 56% from a year earlier, while commercial vehicle volumes remained broadly stable.
The company said the domestic auto industry continues to operate at less than half of its installed production capacity, indicating significant room for a recovery in vehicle volumes and increased localization. However, the industry faces uncertainty following the expiry of the Automotive Industry Development and Export Plan 2021-26 in June 2026. The successor automotive policy has yet to be announced, leaving automakers with limited visibility over future production, investment and localization decisions.
“INDU expects automotive sector growth to moderate in FY27 amid delays in the announcement of the new policy,” the report said.
The company also highlighted changes to Pakistan’s vehicle taxation regime. The increase in the general sales tax on hybrid electric vehicles and plug-in hybrid electric vehicles from 8.5% to 25% resulted in vehicle price adjustments from July 2026. Tax rates applicable to internal combustion engine vehicles and battery electric vehicles remained unchanged. The changes come as Pakistan seeks to balance consumer affordability, government revenue and the development of a competitive domestic automotive industry.
Another major development was the government’s decision in January 2026 to abolish the Baggage Scheme for used-vehicle imports and introduce mandatory pre-shipment inspection requirements under the Gift and Transfer of Residence schemes.
Indus Motor considers the measures positive for Pakistan’s automotive manufacturing sector. Used-vehicle imports declined to about 38,000 units in fiscal 2025-26 from around 42,000 units in the previous fiscal year. Despite the decline, imported used vehicles still represented about 19% of total sales reported by the Pakistan Automotive Manufacturers Association, highlighting continued competition for local assemblers.
The company also warned that the National Tariff Policy 2025-30 could narrow the price gap between locally assembled vehicles and completely built-up imports. This could potentially affect the competitiveness of domestic manufacturing and influence future localization decisions.
The report said Pakistan’s automotive industry has substantial unused capacity, with utilization remaining below 50%. A recovery in demand, therefore, could allow manufacturers to increase production without immediately requiring significant additional capacity.
Consumer financing is another potential catalyst for market recovery. Financing penetration improved to 26% from 21%, according to the report, indicating stronger use of auto financing among consumers.
Indus Motor said further improvements in financing conditions could support vehicle demand, particularly through higher financing limits and longer repayment tenures that would improve affordability for prospective buyers.
The company’s outlook comes as Pakistan’s auto industry continues to navigate weak capacity utilization, taxation changes, competition from used imports and uncertainty over the next automotive policy. For manufacturers such as Indus Motor, the timing and structure of the successor policy will be important in determining investment, localization, production and long-term growth strategies, while measures affecting vehicle imports and consumer financing are likely to remain key factors shaping demand in FY27.