Pakistan’s auto parts sector just proposed significant policy changes. The Pakistan Association of Automotive Parts and Accessories Manufacturers submitted comprehensive tariff recommendations. Therefore, auto parts industry import duties proposals target the upcoming Auto Policy 2026-31. PAAPAM seeks substantially higher duties on imported vehicles specifically. Meanwhile, they’re calling for minimal or zero duties on raw materials.
The association represents substantial industry stakeholders comprehensively. More than 300 member companies participate in PAAPAM directly. Additionally, approximately 1,200 firms operate across the broader automotive ecosystem. This sector supports around 300,000 direct jobs nationally. Furthermore, 1.5 million indirect livelihoods depend on this industry’s health. The ecosystem includes 13 car assemblers and more than 50 motorcycle assemblers. Additionally, 10 truck and bus assemblers plus three tractor assemblers complete the sector.
PAAPAM expressed serious concerns regarding existing national tariff policy. The National Tariff Policy 2025-30 proposes reducing tariffs to maximum 15 percent. However, PAAPAM warned this could weaken domestic industry substantially. Sector-specific conditions require careful consideration according to the association. They estimated existing structural cost disadvantages reaching 34 percent currently. Energy prices, financing costs and taxation contribute to this disadvantage. Additionally, freight, certification and logistics inefficiencies compound these challenges.
Current market conditions reveal concerning industry stagnation clearly. Domestic car sales volumes remain around 2005 levels currently. The market divides among 13 assemblers and more than 40 models. Therefore, intense competition without growth limits profitability substantially. Used car imports and inconsistent CKD kit restrictions have weakened competitiveness further. These factors combine creating challenging conditions for local manufacturers.
PAAPAM’s proposed structure addresses these concerns through specific tariff levels. Completely built units would face 50 percent duties under this proposal. Meanwhile, localized parts would carry 40 percent duties specifically. Completely knocked down kits would face 30 percent duties. Locally produced raw materials would receive just 5 percent duties. Finally, imported raw materials would face zero duty entirely.
The association explained strategic reasoning behind these specific percentages. The 40 percent duty on localized parts discourages component imports specifically. This particularly targets imports from China, Korea and Japan. Historical evidence supports this approach according to PAAPAM. Previous 25 percent tariffs encouraged new assemblers relying on imports heavily. Some assemblers achieved only 0 to 10 percent localization consequently. However, legacy assemblers increased localization when tariffs remained at 45 percent. Therefore, higher tariffs apparently drive genuine localization investment.
Export opportunities represent another major focus within PAAPAM’s proposal. The association identified auto parts exports as significant growth potential. They believe the industry could target $1 billion in exports eventually. However, achieving this requires policy support reflecting longer development cycles. Engineering products and components naturally require extended timeframes. PAAPAM proposed low-cost financing specifically for component exporters. Additionally, they suggested reducing exporter classification thresholds from 80 to 25 percent. Incremental export targets would then apply over five to ten years subsequently.
Financial regulations also require modification according to PAAPAM’s recommendations. They proposed extending export realization periods significantly. Current State Bank rules require 180-day realization periods currently. However, PAAPAM argued for extending this to 365 days instead. Research and development cycles justify these longer timeframes specifically. Additionally, contract completion cycles in auto parts require extended periods. Finally, auto parts industry import duties recommendations reflect PAAPAM’s comprehensive strategy balancing protection, localization and export growth throughout Pakistan’s automotive manufacturing sector.
