Stopped robotic assembly lines, slower production, declining workforce illustrate the depth of the crisis
Pakistan’s domestic auto industry is facing intense pressure, weighed down by heavy taxes, uneven import policies and an uncontrolled influx of used vehicles. The situation is particularly alarming given that the sector contributes about two percent to the country’s GDP and brings in more than $600 million annually in foreign exchange through skilled Pakistani technicians working abroad. In FY 2025 alone, the industry paid over Rs 700 billion. in tax – which underlines its economic importance.
Halted robotic assembly lines, slower production and a shrinking workforce illustrate the depth of the crisis.
Officials from the Ministry of Industry and Production say rules are being tightened to curb misuse of used car imports and standards are being aligned with international benchmarks. They added that the new car policy has been finalized and will be presented to the Prime Minister soon. The IMF is also consulted on tax and customs issues, after which the policy will be issued. According to the ministry, the new framework addresses concerns raised by automakers, parts manufacturers and other stakeholders.
Read: Auto Industry claims Rs50b loss from car imports
Manufacturers argue that if the government rationalizes taxation and regulates the import of used cars, production could stabilize and the livelihoods of hundreds of thousands of families could be protected. Pakistan has become the only auto-producing country in Asia where imported used cars have a significant share of the market, accounting for nearly 25% of all sales between December 2024 and December 2025. New data collected from December 2024 to October 2025 shows that imports of used cars are once again on the rise.
By comparison, used cars represent almost zero percent of sales in India, 0.3% in Vietnam and 1.2% in Thailand – a contrast that experts say highlights Pakistan’s political differences. Other regional economies have restricted such imports to protect their automotive value chains, whereas Pakistan has moved in the opposite direction.
This divergence was widened following the Ministry of Commerce notification of 30 September 2025 (No. 1895), which allowed the import of vehicles up to five years old. Reports suggest that after June 2026 even this cap may be removed, paving the way for a much larger influx.
Pakistan’s automotive sector currently comprises around 1,200 factories employing more than 2.5 million people. It contributes approximately Rs 500 billion annually to government revenue and has attracted around US$ 5 billion in foreign investment.
Read more: Car sales are up 67% year-on-year
Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) senior vice-chairman Shehryar Qadir warned that import-friendly policies could erode the industry’s hard-won gains at a time when industrial revival and localization have been declared government priorities.
Of the 45,758 used vehicles imported into Pakistan between December 2024 and December 2025, nearly 99% came from Japan – a right-hand drive market compatible with local road conditions. Imports from other countries remained negligible: 130 units from Thailand, 55 from the United States, 49 from Jamaica, 47 from Germany, 22 from Australia, 20 from China and only five from the UAE.
Former PAAPAM chairman Abdul Rehman Aziz says, “There is a lack of coordination between the state bank, FBR and provincial excise departments, leading to cases where vehicles are imported under one person’s name but registered under another’s.
“99% of used cars go directly from ports to showrooms because importers are not required to use them for any period, which defeats the original intention of facilitating overseas Pakistanis,” he added.
Industry estimates show that the local supplier sector has suffered a loss of around Rs 50 billion. during this period. The impact on foreign exchange is also clear: local producers use documented banking channels for imports worth about USD 10,138 per vehicle, while used car importers spend about $14,010 per vehicle, much of it through informal means.
Although the government is drafting a new automobile policy aimed at stabilizing domestic production, stakeholders remain divided on whether localization is possible under a liberal import regime.
Data indicate that Pakistan stands out from – and in some respects against – global trends in car production, both in terms of policy and market outcomes. Experts say the key question for policymakers is not whether imports should be allowed, but what their volume should be and whether the current trajectory is consistent with national industrial, employment and fiscal goals.
Car porter and dealer Naveed Muddasir told Express Pakinomist that, “If the abuse of five-year-old used car imports is controlled, the local industry may have a great chance to recover.
Former PAAPAM Chairman Nabeel Hashmi has said, “Rationalizing taxes and improving the import regime can not only restore the lost position of the sector, but also help Pakistan develop the capacity to export vehicles in the future – unlocking billions of dollars in investment and job creation”.
Despite internal challenges, the auto industry contributed more than Rs 700 billion to the exchequer last year, accounting for six percent of total tax revenue, while employing more than 2.5 million people nationwide. But declining production, political uncertainty and growing investor anxiety are exacerbating the sector’s fragility.
Experts argue that only a clear, robust and long-term auto policy can stabilize this industry – one that protects local manufacturers and positions Pakistan to eventually introduce its vehicles to global markets, potentially earning billions in foreign exchange.
They say the auto sector remains a vital pillar of the economy and awaits firm policy direction. Timely action, they warn, could revive the industry and help get the wider economy back on track.
According to the Ministry of Industry and Production, new standards are being set to curb abuse of used car imports. A mandatory holding period is also introduced where importers will be barred from selling a vehicle within the government specified time frame; early sales will incur duties and taxes at standard rates.
Officials say the new policy has been drafted in full stakeholder consultation with committee-level input from across the auto sector. The ministry maintains that the upcoming policy will promote the auto industry and address its long-standing concerns.
