The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has urged the government to protect local manufacturers under the upcoming Auto Policy 2026-31.
The association has proposed higher duties on imported vehicles while seeking minimal or zero tariffs on raw materials. It believes the approach could encourage localization, investment, exports, and employment in Pakistan’s automotive sector.
PAAPAM submitted its proposals for consideration during the formulation of the new policy. The association has also requested a meeting with Prime Minister Shehbaz Sharif before the government finalizes and implements the policy.
PAAPAM Seeks Industry-Focused Tariff Structure
PAAPAM represents more than 300 member companies and around 1,200 businesses across Pakistan’s automotive ecosystem. According to the association, the sector supports around 300,000 direct jobs and 1.5 million indirect livelihoods.
The industry currently includes 13 car assemblers, more than 50 motorcycle and e-bike assemblers, 10 truck and bus assemblers, and three tractor assemblers.
However, PAAPAM has raised concerns about the National Tariff Policy 2025-30. The policy proposes reducing import tariffs to a maximum of 15 percent.
The association warned that such reductions could weaken local vehicle and auto parts manufacturers. It argued that policymakers must consider the sector’s specific challenges before applying broad tariff reductions.
Moreover, PAAPAM estimates that the industry already faces a 34 percent structural cost disadvantage. High energy prices, financing costs, taxation, freight expenses, certification requirements, and logistics inefficiencies contribute to this disadvantage.
Association Proposes Higher Duties on Imported Vehicles
PAAPAM has recommended a 50 percent duty on completely built units under its proposed tariff structure. It also suggested a 40 percent duty on localized parts and 30 percent on completely knocked down kits.
Furthermore, the association proposed a 5 percent duty on locally produced raw materials. It wants the government to impose zero duty on imported raw materials.
PAAPAM believes this structure would encourage manufacturers to increase local production. It also wants to discourage assemblers from relying heavily on imported components.
The association said a previous 25 percent tariff encouraged some new assemblers to depend on imported parts. According to PAAPAM, certain manufacturers achieved only 0 to 10 percent localization under that structure.
By contrast, legacy assemblers increased localization when authorities maintained tariffs at 45 percent.
Auto Parts Industry Seeks Export Growth
PAAPAM has also identified auto parts exports as a major opportunity for Pakistan’s automotive sector. The association believes the industry could eventually target $1 billion in exports with appropriate policy support.
However, it stressed that engineering products and automotive components require longer development cycles. Therefore, exporters need policies that account for extended research, development, and production timelines.
PAAPAM has proposed low-cost financing facilities for component exporters. It also suggested reducing the export threshold for obtaining exporter classification from 80 percent to 25 percent.
The association wants exporters to meet gradually increasing targets over five to 10 years. This approach, it argued, would give companies enough time to develop their export capabilities.
PAAPAM Calls for Longer Export Realization Period
The association has also proposed changes to State Bank of Pakistan foreign exchange rules. It wants the export realization period extended from 180 days to 365 days.
According to PAAPAM, auto parts manufacturers often require more time because of research and development work and lengthy contract completion cycles.
Overall, PAAPAM wants the government to adopt a tariff policy that strengthens local production while supporting exports. The association believes targeted duties, cheaper financing, and greater policy flexibility could help Pakistan develop a stronger automotive parts industry.
It has therefore urged the government to consider these proposals before finalizing the Auto Policy 2026-31 and to consult industry stakeholders during the decision-making process.
