Lower Vehicle Import Duties Put Pakistan Auto Jobs at Risk

Pakistan’s automotive industry is warning that lower duties on completely built-up vehicle imports could weaken domestic manufacturing, reduce demand for locally assembled cars and place thousands of jobs in the parts-supply chain at risk. Industry representatives are urging policymakers to preserve a meaningful tariff gap between imported finished vehicles and locally produced automobiles as the country implements its revised tariff framework.

Auto-sector expert Aamir Allawala described the domestic industry as an interconnected ecosystem spanning raw-material suppliers, more than 1,200 parts vendors and over 100 vehicle assemblers covering cars, motorcycles, electric bikes, buses, trucks and tractors. He argued that local manufacturers already face elevated energy, financing and taxation costs, along with relatively low production volumes, making tariff protection important for maintaining competitiveness.

The Pakistan Association of Automotive Parts and Accessories Manufacturers has proposed a structure that would retain a 50 per cent tariff on completely built-up imports, 40 per cent on locally manufactured parts, 30 per cent on completely knocked-down kits, zero duty on imported raw materials and 5 per cent on locally sourced raw materials. Industry representatives say such differentiation is needed to preserve incentives for companies to manufacture and source components inside Pakistan.

Allawala said previous automotive policies helped increase the number of international assemblers operating in Pakistan but produced uneven localisation. He estimated traditional Japanese manufacturers had achieved local content of around 65 per cent by value, compared with about 25 per cent for Korean brands and less than 10 per cent for Chinese brands. He warned that reducing the peak tariff under the National Tariff Policy could further discourage investment in domestic components.

Industry representatives also raised concerns about employment and exports. Allawala said Pakistan’s auto-parts manufacturers currently export more than $200 million worth of products annually and have substantial growth potential, but face obstacles including high production costs, weak trade agreements, security-related perceptions and limited state support. He claimed a sharp reduction in protection for imported finished vehicles could endanger as many as 300,000 direct jobs across the automotive ecosystem, though that figure represents an industry estimate rather than an official government assessment.

Senior industry representative Shehryar Qadir said changes in the tariff regime had narrowed the difference between duties on imported built-up vehicles and locally assembled units, particularly in the sub-850cc segment. He argued that applying similar duty levels to finished imports and knocked-down kits reduces the commercial incentive for local assembly because imported vehicles contribute less domestic value, employment and technology transfer than vehicles produced through Pakistani factories and vendors.

The industry is also pressing for lower taxes on locally manufactured vehicles. Representatives estimated that government taxes account for roughly 40 to 50 per cent of retail vehicle prices and argued that reducing this burden could improve affordability while supporting domestic demand. They additionally called for stricter checks on imported used vehicles to ensure they meet safety and environmental standards before being allowed into the country.

The debate now places pressure on economic and industry policymakers to balance cheaper imports and greater consumer competition against the need to protect local investment, employment and manufacturing capability. The next steps will depend on how the government implements its tariff policy, responds to proposals from automotive vendors and addresses broader structural costs that manufacturers say are limiting Pakistan’s ability to compete in regional and global supply chains.