Pakistan’s automotive parts industry has called for a major rethink of import tariffs as the government prepares the Auto Policy 2026-31, warning that unrestricted imports could weaken local manufacturing, investment and employment.
The Pakistan Association of Automotive Parts and Accessories Manufacturers, known as PAAPAM, has submitted a position paper for consideration in the formulation of the new policy. The association wants higher duties on completely built units, or CBUs, and selected localised automotive parts, while demanding minimal or zero duties on raw materials.
The proposal could become one of the most important tariff debates under the Auto Policy 2026-31, as Pakistan attempts to balance cheaper vehicles for consumers with the need to build a stronger domestic manufacturing base.
Auto Policy 2026-31 Faces a Protection Versus Competition Test
PAAPAM argues that the tariff structure should encourage manufacturers to produce more components locally rather than depend heavily on imported vehicles and parts.
Its proposed approach is straightforward. Raw materials needed for domestic production should face minimal or zero customs duties, while fully built imported vehicles should carry higher duties. Localised parts should also receive tariff protection against competing imports.
From an industrial policy perspective, the argument has merit. A country that wants to expand manufacturing cannot expect local suppliers to compete indefinitely against imported finished products while simultaneously facing high costs for production inputs.
However, the government must be careful not to turn the Auto Policy 2026-31 into another protectionist framework that shields inefficient manufacturers indefinitely.
Tariff protection can help an emerging industry develop, but excessive protection can also reduce competition, keep prices high and give manufacturers little incentive to improve quality or productivity.
PAAPAM Highlights 300,000 Direct Automotive Jobs
PAAPAM says the automotive parts industry and wider ecosystem represent a significant source of employment in Pakistan.
According to the association, the sector generates around 300,000 direct jobs and supports another 1.5 million indirect livelihoods. Its members include more than 300 companies, while around 1,200 firms operate across the broader automotive ecosystem.
Pakistan currently has 13 local car assemblers, more than 50 motorcycle and electric bike assemblers, 10 truck and bus assemblers and three tractor assemblers.
These figures underline why the tariff decisions under the Auto Policy 2026-31 matter beyond vehicle prices. Changes in import duties could affect factories, vendors, logistics companies, dealerships and thousands of workers connected to the automotive supply chain.
Auto Policy 2026-31 Must Avoid Another Localisation Trap
The biggest question for policymakers is whether higher import duties will actually produce globally competitive Pakistani manufacturers.
Pakistan has used localisation policies for decades, yet the automotive industry continues to face concerns over limited competition, high vehicle prices, supply constraints and dependence on imported components.
That makes PAAPAM’s demand worthy of scrutiny.
Protecting local parts manufacturers without demanding measurable improvements in productivity, quality, exports and technology transfer could simply shift the cost onto consumers.
The new policy should therefore link tariff protection with clear performance requirements. Manufacturers receiving protection should have incentives to increase local value addition, develop export markets, improve quality standards and reduce production costs.
Auto Policy 2026-31 Could Reshape Pakistan’s Automotive Industry
PAAPAM wants the government to finalise automotive import tariffs in a way that supports localisation, exports, investment, employment and long-term industrial growth.
The proposal places a difficult choice before policymakers. Higher CBU duties could encourage local production, but consumers could ultimately pay more if competition remains weak.
The real test of the Auto Policy 2026-31 will therefore not be whether it protects the automotive industry. It will be whether that protection creates a more competitive industry.
Pakistan needs an automotive policy that rewards manufacturing efficiency rather than simply insulating producers from imports. If the government gets that balance right, the new policy could strengthen the domestic auto supply chain and create a foundation for exports. If it gets it wrong, Pakistan could end up protecting an industry without making it genuinely competitive.