Auto Parts Industry in Pakistan Threatens Shutdown due to Used Car Imports
Domestic auto parts makers in Pakistan are threatening to shut down the nation’s car assembly business within the next couple of years if the government proceeds with its intention to introduce greater used car imports beginning in September.
Aamir Allawala, former chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), expressed his fears in a media briefing. He said used cars already dominate 25% of Pakistan’s automobile market with more than 40,000 old vehicles being sold every year. This is a much higher percentage compared to nations like India where the share of used cars is zero and nations like Vietnam and Thailand with 0.3% and 1.2% respectively.
One of the key concerns Allawala identified was the disparity in import duties. Pakistan’s tariff on imported completely built-up (CBU) vehicles is between 50% and 100%, while nations such as India charge a 125% tariff, Vietnam charges 52%, and Thailand charges an 80% tariff. These high tariffs in other nations assist in restricting the importation of used cars into their markets.
He added that the pre-owned cars have emerged as Pakistan’s second-largest automotive market, ahead of the combined sales of brands such as Toyota, Honda, Hyundai, Kia, Haval, MG, and Changan. Allawala further added that there is a lack of transparency in the used car market. Imports and sales are not correctly documented, payment made without documentation through informal means like hawala, and a majority of payments being made in cash. The practice evades proper documentation and taxes, which adversely affects local assemblers and vendors.
Allawala cautioned that in the event of the government proceeding to liberalise imports of used cars, Pakistan would lose an estimated Rs60 billion in revenue for local auto part manufacturers and could lead to 40,000 job losses in assembly units and vending outlets. He also noted that foreign car makers in Pakistan could turn to importing fully built-up units, new as well as old, and leave local parts vendors with no market.
Allawala also talked about the Auto Policy 2016–21, which had rewarded 10 new firms with a 50% duty rebate on locally produced parts. He asserted this policy has affected local vendors negatively, as some of the new firms have accumulated tremendous profits without employing a lot of local parts. For instance, one company made Rs36 billion in profits in FY25 despite meager localization, outpacing production by established players.
PAAPAM’s Senior Vice Chairman, Shehryar Qadir, called on the government to follow policies like those of Thailand and Vietnam, which favor local vendors and export-oriented industries.
While this was going on, Senate Aon Abbas, Chairman of the Standing Committee on Industries and Production, promised the government’s resolve to support domestic manufacturing. When he visited Indus Motor Company (IMC), he reiterated the pivotal role of the country’s local automobile industry in the provision of jobs and driving industrial development.
IMC’s CEO, Ali Asghar Jamali, similarly complained of the underutilization of the sector’s production capacities, observing that more than 64% of it went unused with huge investments by foreign car manufacturers.
