Pakistan’s domestic automobile industry is facing intense pressure, burdened by heavy taxes, unequal import policies and a rampant influx of used vehicles. The situation is particularly alarming given that the sector contributes around two per cent to the country’s GDP and generates more than $600 million annually in foreign exchange through qualified Pakistani technicians working abroad. In fiscal 2025 alone, the industry paid more than Rs 700 billion in taxes, underscoring its economic importance.

Stagnant robotic assembly lines, slowing production and shrinking workforces illustrate the depth of the crisis.

Ministry of Industries and Production officials say regulations are being tightened to curb misuse of used car imports and that standards are being aligned with international benchmarks. They added that the new automobile policy is already finalized and will soon be presented to the prime minister. The IMF is also being joined in tax and tariff matters, after which the policy will be issued. According to the ministry, the new framework addresses concerns raised by automakers, spare parts manufacturers and other stakeholders.

Read: Auto industry claims Rs 50 billion loss on car imports

Manufacturers argue that if the government rationalizes taxes and regulates used car imports, production could be stabilized and the livelihoods of hundreds of thousands of families could be protected. Pakistan has become the only car-producing country in Asia where imported used cars occupy a significant share of the market, accounting for almost 25% of all sales between December 2024 and December 2025. Recent data compiled between December 2024 and October 2025 shows that used car imports are again rising sharply.

By comparison, used cars account for 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 inconsistencies. Other regional economies have restricted such imports to protect their automobile value chains, while Pakistan has moved in the opposite direction.

This divergence widened after the Ministry of Commerce notification of September 30, 2025 (No. 1895), which allowed the importation of vehicles up to five years old. Reports suggest that after June 2026, even this limit could be removed, paving the way for a much larger entry.

Pakistan’s automotive sector currently comprises around 1,200 factories, employing more than 2.5 million people. It contributes approximately Rs 500 billion a year to government revenue and has attracted around $5 billion in foreign investment.

Read more: Car sales increase 67% year-on-year

Shehryar Qadir, senior vice president of Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), 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 United Arab Emirates.

Former PAAPAM president 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 in the name of one person but registered in the name of another.

“99% of used cars go directly from ports to showrooms because importers are not required to use them for any period, defeating the original intention of facilitating access for overseas Pakistanis,” he added.

Industry estimates show that the local supplier sector has suffered losses of around Rs 50 billion during this period. The impact on currencies is also clear: local manufacturers use documented banking channels for imports worth around $10,138 per vehicle, while used car importers spend around $14,010 per vehicle, much of it through informal means.

Although the government is drafting a new automotive policy aimed at stabilizing domestic production, stakeholders remain divided over whether localization is feasible under a liberal import regime.

The data indicates that Pakistan stands apart from (and in some respects bucks) global auto manufacturing trends, 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 aligns with national industrial, labor and fiscal goals.

Said automobile importer and distributor Naveed Muddasir The express PAkGazette that “if the misuse of used cars imported five years ago is controlled, the local industry could have great chances of recovery.”

Former PAAPAM president Nabeel Hashmi has said: “Rationalizing taxes and improving the import regime could not only restore the sector’s lost position but also help Pakistan develop the capacity to export vehicles in the future, unlocking billions of dollars in investment and job creation.”

Despite domestic challenges, the automobile industry contributed more than Rs 700 billion to the national exchequer last year, accounting for six percent of total tax revenue, and employs more than 2.5 million people across the country. But falling production, political uncertainty and growing investor anxiety are deepening the sector’s fragility.

Experts argue that only a clear, strong, long-term automotive 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 automotive sector remains a vital pillar of the economy and urgently awaits firm political direction. They warn that timely action could revive the industry and help get the broader economy back on track.

According to the Ministry of Industry and Production, new rules are being established to curb the misuse of used vehicle imports. A mandatory holding period is also being introduced, under which importers will not be able to sell a vehicle before the deadline specified by the government; Advance sales will incur duties and taxes at standard rates.

Officials say the new policy was drafted with full stakeholder consultation, with committee-level input from across the automotive sector. The ministry maintains that the upcoming policy will promote the automobile industry and address its long-standing concerns.

Pakistan’s domestic automobile industry is facing intense pressure, burdened by heavy taxes, unequal import policies and a rampant influx of used vehicles. The situation is particularly alarming given that the sector contributes around two per cent to the country’s GDP and generates more than $600 million annually in foreign exchange through qualified Pakistani technicians working abroad. In fiscal 2025 alone, the industry paid more than Rs 700 billion in taxes, underscoring its economic importance.

Stagnant robotic assembly lines, slowing production and shrinking workforces illustrate the depth of the crisis.

Ministry of Industries and Production officials say regulations are being tightened to curb misuse of used car imports and that standards are being aligned with international benchmarks. They added that the new automobile policy is already finalized and will soon be presented to the prime minister. The IMF is also being joined in tax and tariff matters, after which the policy will be issued. According to the ministry, the new framework addresses concerns raised by automakers, spare parts manufacturers and other stakeholders.

Read: Auto industry claims Rs 50 billion loss on car imports

Manufacturers argue that if the government rationalizes taxes and regulates used car imports, production could be stabilized and the livelihoods of hundreds of thousands of families could be protected. Pakistan has become the only car-producing country in Asia where imported used cars occupy a significant share of the market, accounting for almost 25% of all sales between December 2024 and December 2025. Recent data compiled between December 2024 and October 2025 shows that used car imports are again rising sharply.

By comparison, used cars account for 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 inconsistencies. Other regional economies have restricted such imports to protect their automobile value chains, while Pakistan has moved in the opposite direction.

This divergence widened after the Ministry of Commerce notification of September 30, 2025 (No. 1895), which allowed the importation of vehicles up to five years old. Reports suggest that after June 2026, even this limit could be removed, paving the way for a much larger entry.

Pakistan’s automotive sector currently comprises around 1,200 factories, employing more than 2.5 million people. It contributes approximately Rs 500 billion a year to government revenue and has attracted around $5 billion in foreign investment.

Read more: Car sales increase 67% year-on-year

Shehryar Qadir, senior vice president of Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), 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 United Arab Emirates.

Former PAAPAM president 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 in the name of one person but registered in the name of another.

“99% of used cars go directly from ports to showrooms because importers are not required to use them for any period, defeating the original intention of facilitating access for overseas Pakistanis,” he added.

Industry estimates show that the local supplier sector has suffered losses of around Rs 50 billion during this period. The impact on currencies is also clear: local manufacturers use documented banking channels for imports worth around $10,138 per vehicle, while used car importers spend around $14,010 per vehicle, much of it through informal means.

Although the government is drafting a new automotive policy aimed at stabilizing domestic production, stakeholders remain divided over whether localization is feasible under a liberal import regime.

The data indicates that Pakistan stands apart from (and in some respects bucks) global auto manufacturing trends, 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 aligns with national industrial, labor and fiscal goals.

Said automobile importer and distributor Naveed Muddasir The express PAkGazette that “if the misuse of used cars imported five years ago is controlled, the local industry could have great chances of recovery.”

Former PAAPAM president Nabeel Hashmi has said: “Rationalizing taxes and improving the import regime could not only restore the sector’s lost position but also help Pakistan develop the capacity to export vehicles in the future, unlocking billions of dollars in investment and job creation.”

Despite domestic challenges, the automobile industry contributed more than Rs 700 billion to the national exchequer last year, accounting for six percent of total tax revenue, and employs more than 2.5 million people across the country. But falling production, political uncertainty and growing investor anxiety are deepening the sector’s fragility.

Experts argue that only a clear, strong, long-term automotive 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 automotive sector remains a vital pillar of the economy and urgently awaits firm political direction. They warn that timely action could revive the industry and help get the broader economy back on track.

According to the Ministry of Industry and Production, new rules are being established to curb the misuse of used vehicle imports. A mandatory holding period is also being introduced, under which importers will not be able to sell a vehicle before the deadline specified by the government; Advance sales will incur duties and taxes at standard rates.

Officials say the new policy was drafted with full stakeholder consultation, with committee-level input from across the automotive sector. The ministry maintains that the upcoming policy will promote the automobile industry and address its long-standing concerns.