Industry leaders and PAAPAM caution that proposed reductions in import duties could threaten over 1,200 local auto parts companies and 1.8 million jobs, amid concerns over market flooding and policy inconsistencies.
Pakistan’s local auto parts manufacturing industry is currently grappling with quite a bit of uncertainty, especially in light of proposed changes to the National Tariff Policy for FY 2025-31. These adjustments aim to cut import duties down to a maximum of 15 percent, as part of a broader move towards trade liberalization. The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has been pretty vocal about their opposition, warning that such a significant reduction in tariffs could seriously threaten the survival of the domestic auto component industry. They’re warning that over 1,200 companies might face closure, and around 1.8 million jobs could be at risk.
Shehryar Qadir, who’s the Senior Vice Chairman of PAAPAM, pointed out how starkly different Pakistan’s approach is compared to other countries that support their automotive sectors with protective tariffs. For example, India imposes import duties on cars at a hefty 125 percent, Thailand’s are at 80 percent, Indonesia’s at 60 percent, and Vietnam’s at 52 percent. All these countries aim to shield and nurture their local auto industries. By contrast, Pakistan’s plan to flatten tariffs to a range of just 0-15 percent, with a maximum of 15, actually risks flooding the market with cheaper imports, which could be a huge blow to local manufacturers.
And honestly, the repercussions go far beyond just the manufacturers. The auto sector supports a wide network of related industries, supplying key materials like steel, plastic, rubber, copper, aluminum, and various other parts to big vehicle assembly plants run by Toyota, Honda, Suzuki, Hyundai, Kia, and Changan. There’s already been a noticeable decline—vehicle sales have fallen by over 50 percent, dropping below 150,000 units last year. This decline reflects deeper systemic challenges across the supply chain, which not only impacts employment but also stalls skill development that’s vital for long-term industrial growth.
Usman Aslam Malik, who’s the chair of PAAPAM, along with other industry leaders, have consistently warned about rushing into these tariff cuts without careful planning. They emphasize that sudden, steep reductions—without mechanisms like cascading duties—could undermine the industry’s ability to add value and remain resilient in the long run. Malik has stressed the importance of phased implementation and engaging all stakeholders to protect investments, jobs, and the country’s competitive edge in the global market. PAAPAM argues that such cautious measures are necessary if Pakistan hopes to avoid destabilizing its manufacturing base and to safeguard the industry that forms the backbone of regional economies.
Adding to the complexity, recent fiscal decisions seem to be sending mixed signals. Despite commitments under the Automotive Industry Development and Export Policy (AIDEP) 2021-26 to bolster local manufacturing, the government hiked the sales tax on small cars from 12.5 percent to 18 percent. Simultaneously, they cut import taxes on large SUVs—leading to vehicle price drops that can be over Rs 20 million per car. This kind of tax disparity distorts the market, making imported cars more attractive to consumers, even as locally made vehicles and parts struggle to compete.
These recent moves have raised real concerns about whether Pakistan’s auto parts industry can remain sustainable down the line. The industry’s contribution to employment, import substitution, and export potential remains significant. However, rising energy costs, heavy taxation, and a lack of policy consistency are creating additional hurdles. Industry representatives stress the importance of creating a business environment conducive to investment and growth.
The draft National Tariff Policy for 2025-30 also aims to simplify tariffs by reducing the number of slabs to just four—0%, 5%, 10%, and 15%—and gradually phasing out additional customs and regulatory duties. Officially, these reforms are meant to boost industrial growth by making products more affordable and competitive, and by encouraging exports. But many stakeholders in the auto parts sector insist that these reforms need to be carried out transparently, with clear timelines and regular consultation with the industry, to find a good balance. They caution that too rapid a shift towards liberalization without enough safeguards could turn Pakistan’s auto industry into a heavily import-dependent market, with dire consequences for jobs, capability, and economic resilience overall.
In a nutshell, if these tariff policies are rolled out without proper adjustments and meaningful dialogue with industry players, there’s a real danger that Pakistan’s automotive scene might shift away from protecting domestic production toward relying heavily on imports. Such a move would have serious implications—not just for employment but also for long-term industrial strength and economic stability. That’s why PAAPAM’s call for a thorough fact-finding mission and structured engagement is so important. They’re emphasizing the need for policies that actually support Pakistan’s automotive industry rather than undermine it.
Note: References correspond to the footnotes provided and are included here for context.
Source: Noah Wire Services
