Pakistan’s automotive industry has raised concerns over proposed changes to vehicle import tariffs. The Pakistan Automotive Manufacturers Association (PAMA) has asked Prime Minister Shehbaz Sharif to intervene immediately.
The association believes the proposed tariff cuts could weaken local vehicle manufacturing. It has warned that cheaper imported vehicles could place significant pressure on domestic producers and suppliers. PAMA made the request in a letter to the prime minister regarding the National Tariff Policy 2026–31 (NTP 2026–31).
PAMA Highlights Auto Industry’s Economic Contribution
According to PAMA, Pakistan’s automotive sector includes 31 vehicle brands and more than 100 models. Original equipment manufacturers and auto parts companies have invested over US$5 billion during the past three automotive policy periods.
The passenger car segment also contributes more than Rs700 billion to government tax revenues. Moreover, the sector supports the livelihoods of around 2.5 million Pakistanis.
However, manufacturers are currently facing weak production levels. The industry is operating below 50% of its installed annual capacity of 500,000 vehicles.
PAMA attributed the low utilisation rate to repeated policy changes and measures that have weakened consumer demand.
Proposed CBU Tariff Cut Raises Concerns
The association has raised particular concerns about imported Completely Built Units (CBUs). Pakistan imports around 45,000 CBU vehicles each year.
PAMA said these imports account for nearly 18% of the domestic vehicle market. Consequently, the association believes higher CBU penetration could further reduce demand for locally produced vehicles.
The proposed NTP 2026–31 could reduce CBU tariffs to 15%. PAMA argued that the proposal relies on unrealistic assumptions about exports and industry competitiveness.
Instead, the association warned that lower import tariffs could make foreign vehicles more competitive than locally manufactured models. This could ultimately accelerate deindustrialisation rather than strengthen domestic production.
PAMA Warns of Factory Closures
PAMA also highlighted tariff policies in other automotive manufacturing countries. It noted that Vietnam maintains vehicle import tariffs of up to 70%.
Meanwhile, Thailand applies tariffs of as much as 80% on imported vehicles. PAMA said these examples show how major automotive markets protect domestic manufacturing through calibrated tariff structures.
The association warned of serious consequences if Pakistan reduces tariffs without excluding the automotive sector.
According to PAMA, vehicle manufacturing plants could face permanent closures. Around 1,324 auto parts manufacturers could also come under pressure.
The association estimates that the industry could lose more than US$5 billion in industrial investment. It also warned that direct unemployment could affect the livelihoods of approximately 2.5 million people.
PAMA Seeks Long-Term Auto Policy
PAMA has therefore urged the government to exclude the automotive industry from the proposed tariff reductions.
The association also wants a stable, long-term automotive policy. It believes predictable tariff structures would help manufacturers plan production, investment and expansion.
Additionally, PAMA has called for a minimum 40% tariff differential between CBU imports and locally manufactured vehicles. The association argues that this gap would support sustainable production and encourage deeper localisation.
The demand comes as Pakistan seeks to strengthen its industrial base and attract new investment. A stable policy environment could also encourage manufacturers to expand their local supply chains.
Auto Sector Seeks Government Support
PAMA maintains that government support remains crucial for protecting Pakistan’s automotive manufacturing industry. The association believes policy stability can preserve jobs while encouraging further investment.
At the same time, stronger local production could help develop Pakistan’s auto parts ecosystem and improve industrial capacity.
The association has therefore urged policymakers to carefully assess the potential impact of tariff reforms before implementation. For PAMA, protecting local manufacturing is essential to preserving employment, investment and Pakistan’s broader economic resilience.
