Auto policy shrouded in secrecy

Pakistan's upcoming auto policy for 2026-31 is facing growing criticism from industry stakeholders over an unusual lack of transparency, with key players claiming they remain unaware of the policy's final contours despite its completion and submission to the Prime Minister's Office.

"We are completely unaware of what is in the policy," said Ali Asghar Jamali, Chief Executive Officer of Indus Motor Company (IMC), while speaking to The Express Tribune on the sidelines of a recent industry engagement. "They initially took our proposals, but now it's the 26th draft that has been finalised, and we have no clue what it holds for us."

The concerns were echoed across the automotive sector, which has traditionally been engaged in consultative policymaking. Industry representatives noted that draft policies are typically made public for feedback over several months, a practice they say has been bypassed this time around.

In a recent interview with The Express Tribune, Hamad Ali Mansoor, CEO of the Engineering Development Board (EDB), declined to disclose details, stating that the draft had been finalised and forwarded to the Prime Minister's Office. "You will learn about it once it is approved," he said.

Industry officials argue that such secrecy runs counter to democratic norms and risks undermining stakeholder confidence. "Policies, whether they are related to business and industry or any other social sector, are usually uploaded publicly on government websites to allow feedback and ensure alignment with ground realities," said a senior industry representative.

Analysts point out that Pakistan's centralised policymaking structure may also be contributing to the disconnect. With key ministries based in Islamabad, over 1,300 kilometres from Karachi, the country's commercial hub, communication gaps often emerge between regulators and industry players. However, stakeholders acknowledged that Mansoor has made efforts to bridge this divide through increased engagement with Karachi-based businesses.

Despite the controversy, the EDB chief expressed optimism about the future of electric vehicles (EVs) in Pakistan, suggesting that the shift towards EVs could make cars more affordable. "EVs have fewer parts, which can significantly reduce manufacturing costs," he noted.

He also revealed that an undisclosed EV manufacturer is planning to set up a plant in Lahore, aiming to introduce a vehicle priced around Rs1 million. While technically classified as a quadricycle, smaller than entry-level cars like the Suzuki Alto, the vehicle is expected to offer basic features of a conventional four-wheeler.

Additionally, plans for lithium battery production facilities are underway, which could further reduce vehicle costs and improve affordability for middle-income consumers. Industry experts note that most vehicles currently assembled in Pakistan are designed for markets with significantly higher per capita incomes, making them expensive for local buyers. Some stakeholders speculate that the secrecy surrounding the policy may be an attempt by the government to limit the influence of powerful industry lobbies, which have historically shaped policy outcomes. In the previous policy cycle, for instance, hybrid vehicles were controversially included under EV incentives.

However, market participants largely disagree with this approach, warning that a lack of transparency could create uncertainty and discourage investment. "A predictable and transparent policy environment is essential for long-term planning," said an industry executive.

Concerns also persist over declining localisation levels. Despite a rise in the number of original equipment manufacturers (OEMs) entering Pakistan, many new entrants have relied heavily on imported parts rather than developing local vendor networks.

Auto expert Mashood Ali Khan highlighted that the number of local vendors has actually declined, even as the number of assemblers has increased, a worrying trend for employment and industrial depth.

Pakistan's automotive sector continues to face structural challenges, including policy inconsistency, low capacity utilisation, and rising imports of used vehicles. These issues were discussed during the IMC-hosted engagement, where company leadership presented a comparative analysis of regional markets.

According to Jamali, Pakistan is among only 16 countries globally with the capability to manufacture a full range of vehicles, including passenger cars, trucks, buses, and light commercial vehicles. Seven of the world's top 10 automotive brands now operate in the country, indicating a strong potential.

However, performance has lagged behind regional peers. Over the past decade, Pakistan's auto market grew by just 15%, compared to 60% growth in India and 180% in Vietnam.

The sector currently contributes around 2.8% to GDP and employs approximately 1.8 million people. Yet, only 30% of the installed production capacity of 600,000 units is being utilised, a sharp decline from 84% utilisation recorded in 2017-18.

Industry players attribute this underperformance to inconsistent policies, high taxation, and competition from used car imports. While recent measures to abolish the baggage scheme for used car imports have been welcomed, challenges remain.

On the external account side, IMC data shows that local vehicle assembly accounts for just 2.08% of Pakistan's total imports, while imports of completely built-up (CBU) vehicles have risen significantly in recent years.

Jamali stressed the importance of a stable and long-term policy framework with minimal mid-course changes. "Consistency in policy, investment-friendly financing, and a focus on localisation are critical to unlocking the sector's potential," he said.

He added that IMC, which has invested over $736 million in Pakistan and plans an additional $300 million investment, will align its future strategy with the government's policy direction once it is formally announced.