Auto industry buckles under rising used-car imports

Stalled robotic assembly lines, slowing production, shrinking workforce illustrate depth of crisis

Pakistan’s domestic automobile industry is facing intense pressure, weighed down by heavy taxation, uneven import policies, and an unchecked influx of used vehicles. The situation is particularly alarming given that the sector contributes around two per cent to the country’s GDP and brings in more than $600 million annually in foreign exchange through skilled Pakistani technicians working overseas. In the 2025 financial year alone, the industry paid over Rs700 billion in taxes — underlining its economic importance.

Stalled robotic assembly lines, slowing production, and a shrinking workforce illustrate the depth of the crisis.

Officials from the Ministry of Industries and Production say regulations are being tightened to curb the misuse of used-car imports and that standards are being aligned with international benchmarks. They added that the new auto policy has been finalised and will soon be presented to the prime minister. The IMF is also being taken on board regarding taxation and tariff matters, after which the policy will be issued. According to the ministry, the new framework addresses concerns raised by auto manufacturers, parts makers, and other stakeholders.

Read: Auto Industry claims Rs50b loss from car imports

Manufacturers argue that if the government rationalises taxation and regulates used-car imports, production could stabilise and the livelihoods of hundreds of thousands of families could be protected. Pakistan has become the only auto-producing country in Asia where imported used cars hold a significant share of the market, accounting for nearly 25% of all sales between December 2024 and December 2025. Fresh data compiled from December 2024 to October 2025 shows that used-car imports are once again rising sharply.

By comparison, used cars represent almost zero per cent of sales in India, 0.3% in Vietnam, and 1.2% in Thailand — a contrast that experts say highlights Pakistan’s policy inconsistencies. Other regional economies have restricted such imports to protect their auto value chains, whereas Pakistan has moved in the opposite direction.

This divergence widened after the Ministry of Commerce’s September 30, 2025, notification (No. 1895), which allowed the import of vehicles up to five years old. Reports suggest that after June 2026, even this limit may be removed, paving the way for a much larger inflow.

Pakistan’s auto sector currently comprises around 1,200 factories, employing more than 2.5 million people. It contributes approximately Rs500 billion annually to government revenue and has attracted around $5 billion in foreign investment.

Read more: Auto sales jump 67% year-on-year

Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) senior vice-chairperson Shehryar Qadir warned that import-friendly policies could erode the industry’s hard-won gains at a time when industrial revival and localisation have been declared government priorities.

Of the 45,758 used vehicles imported into Pakistan between December 2024 and December 2025, nearly 99% came from Japan — a right-hand drive market compatible with local road conditions. Imports from other countries remained negligible: 130 units from Thailand, 55 from the US, 49 from Jamaica, 47 from Germany, 22 from Australia, 20 from China, and just five from the UAE.

Former PAAPAM chairperson Abdul Rehman Aziz says, "There is a lack of coordination between the State Bank, FBR, and provincial excise departments, leading to cases in which vehicles are imported under one person’s name but registered under another’s.

"99% of used cars go straight from ports to showrooms because importers are not required to use them for any period, defeating the original intent of facilitating overseas Pakistanis," he added.

Industry estimates show that the local vendor sector has suffered losses of around Rs50 billion during this period. The impact on foreign exchange is also clear: local manufacturers use documented banking channels for imports worth about $10,138 per vehicle, while used-car importers spend around $14,010 per vehicle, much of it through informal means.

Although the government is drafting a new auto policy aimed at stabilising domestic production, stakeholders remain divided on whether localisation is feasible under a liberal import regime.

Data indicates that Pakistan stands apart — and in some respects against — global auto-manufacturing trends, both in policy and market outcomes. Experts say the key question for policymakers is not whether imports should be allowed, but what their volume should be, and whether the current trajectory aligns with national industrial, employment, and fiscal objectives.

Car importer and dealer Naveed Muddasir told The Express Tribune that, "If the misuse of five-year-old used-car imports is checked, the local industry could be given a strong chance of recovery.

Former PAAPAM chairperson Nabeel Hashmi has said, "Rationalising taxes and improving the import regime could not only restore the sector’s lost position but also help Pakistan develop the capability to export vehicles in the future — unlocking billions of dollars in investment and job creation".

Despite internal challenges, the auto industry contributed more than Rs700 billion to the national exchequer last year, accounting for six per cent of total tax revenue, while employing more than 2.5 million people nationwide. But falling production, policy uncertainty, and growing investor anxiety are deepening the sector’s fragility.

Experts argue that only a clear, robust, and long-term auto policy can stabilise this industry — one that protects local manufacturers and positions Pakistan to eventually introduce its vehicles to global markets, potentially earning billions in foreign exchange.

They say the auto sector remains a vital pillar of the economy and urgently awaits steady policy direction. Timely action, they warn, could revive the industry and help put the wider economy back on track.

According to the Ministry of Industries and Production, new standards are being set to curb the misuse of used-car imports. A mandatory holding period is also being introduced, under which importers will be barred from selling a vehicle before the government-specified timeframe; early sales will incur duties and taxes at standard rates.

Officials say the new policy has been drafted with full stakeholder consultation, with committee-level input from across the auto sector. The ministry maintains that the upcoming policy will promote the auto industry and address its longstanding concerns.