LAHORE: Pakistan’s automotive industry is undergoing a remarkable transformation, driven by localization efforts that have significantly reduced reliance on imports. The industry, contributing 2.8% to the nation’s GDP, has seen the localization rate for cars and Light Commercial Vehicles (LCVs) rise to 55% by 2024.
This was shared by Ali Asghar Jamali, Chief Executive Officer, Indus Motor Company along with Abdul Waheed Khan, Director General, Pakistan Automotive Manufacturers Association (PAMA).
Abdul Waheed stated that since localization initiatives began in the 1990s in Pakistan, this shift has not only injected around $5 billion into the economy and has also created approximately 2.5 million jobs. Despite these achievements, challenges remain, particularly in the absence of primary industries like steel and chemicals. With the right policies and investments, he said localization can propel Pakistan towards becoming a major automotive hub in the region.
Ali A Jamali mentioned that the establishment of over 300 local vendors has led to continued investments by Original Equipment Manufacturers (OEMs) and vendors in Pakistan, fostering the growth of allied industries such as lean manufacturing and just-in-time logistics.
These advancements have not only enhanced production efficiency but also contributed to a skilled workforce that is now sought after in international markets, particularly the Middle East, leading to increased remittances, he added.
He reflected that the introduction of the first auto policy in 2007 provided incentives for domestic production, encouraging supply chain development and technology transfers. As a result, the industry has progressively increased the local production of parts, with significant improvements in manufacturing capabilities, he said.
Jamali shared that the success of localization can be witnessed in vehicle’s pricing. In 1993, most popular sedan with 20% localization cost $20,185 to customers, while in 2024, with localization reaching 64%, the price had been reduced to $15,996 (excluding foreign exchange fluctuations).
This demonstrates how local production can effectively control costs and benefit consumers. Despite these advancements, several challenges hinder the complete localization of Pakistan’s automotive industry.
DG PAMA said that one of the biggest obstacles is the lack of raw material production within the country. Essential materials such as steel, plastic, rubber, aluminum, and glass components must be imported, increasing production costs and dependency on foreign suppliers. This puts Pakistan at a disadvantage compared to automotive hubs like India, Thailand, and Indonesia, which have well-developed raw material industries, he said.
DG PAMA also mentioned that another major challenge is the high customs duty on Completely Knocked Down (CKD) units. In Pakistan, duties range from 32% to 46% for existing players, whereas in India, a market with over four million vehicles, the duty is flat 15%. This disparity makes it difficult for Pakistani manufacturers to compete in both domestic and international markets.
He highlighted that while Pakistan has made some progress in exporting vehicles and parts, the lack of government support in providing duty rebates and export facilitation hinders further growth. Establishing an efficient export framework, including timely incentives for local manufacturers, could significantly boost Pakistan’s potential as an automotive export hub, he said.
As global demand for fuel-efficient and environmentally friendly vehicles grows, Khan emphasized that Pakistani manufacturers must invest in advanced localization efforts to ensure they remain competitive.
To fully capitalize on this, the government must prioritize localization in the next auto policy, encouraging investments in Research and Development (R&D) and providing tax breaks and other incentives to manufacturers.
Moreover, DG PAMA said that addressing the infrastructure gaps is critical. Developing a robust steel and resin industry would reduce dependence on imports and make the local supply chain more self-sufficient. He suggested that the establishment of local testing and certification facilities would further enhance the credibility of Pakistani auto parts in international markets, making exports more viable.
Pakistan’s automotive industry has made significant strides in localization, driving economic growth, job creation, and technological advancement, he added.
However, Jamali concluded that to fully realize its potential, the government must address the key challenges of raw material availability, high import duties, and limited market access for Pakistani Automotive products. By fostering a more supportive policy environment, investing in local manufacturing infrastructure and encouraging exports, Pakistan can transform its automotive sector into a globally competitive industry.
The combined efforts of OEMs, local vendors, and government support can make localization a cornerstone of economic self-sufficiency and innovation in Pakistan’s industrial landscape, he said.
Copyright Business Recorder, 2025
