Pakistan's auto parts makers have come out strongly against the draft Auto Policy 2026 to 2031. The Pakistan Association of Automotive Parts and Accessories Manufacturers, known as PAAPAM, says the plan to bring import tariffs down to 15 percent would push local vendors out of business and, in time, hurt car assemblers too.
The warning came after Prime Minister Shehbaz Sharif approved the final draft on Tuesday 20 October 2026. The draft now goes to the IMF and the federal cabinet, so the parts makers' objections land at the last stage before the policy is locked in.
What PAAPAM said
PAAPAM Chairman Abdul Rehman Aizaz said that by lowering the import tariff on parts to 15 percent, the new policy would phase out local parts manufacturers and benefit assemblers. He warned that assemblers themselves could eventually be phased out as imported cars take over.
"This policy will make Pakistan an import destination country with no local industrial base in the auto sector," he said.
What the draft actually does on tariffs
Tariffs sit at the centre of the policy. Based on the final draft shared by government sources, the key measures are these.
- Tariffs on completely built up cars and on completely knocked down kits would come down step by step to 15 percent by 2030 to 2031
- For petrol and diesel cars and SUVs, customs duty would be 15 percent in 2031 with no additional or regulatory duty on top
- EV specific parts that are not made locally could be imported in kit form at a reduced tariff of 1 percent
- Carmakers would get new targets for using locally made parts, and companies that miss them could lose their incentives
- Rs 2.1 billion from the proposed Auto Development Levy would fund a vendor upgrade and technology transfer programme run by the Engineering Development Board and SMEDA
So the government argues it is offering parts makers support through local content targets and upgrade funding. PAAPAM's view is that none of that helps if an imported part lands cheaper than a locally made one.
Why vendors say 15 percent is too low
PAAPAM has made the same case through the summer. Its senior vice chairman Shehryar Qadir said in August that local parts makers face a cost disadvantage of about 34 percent against regional rivals, for five main reasons.
- Almost all raw materials such as auto grade steel, plastic resin and rubber are imported
- Energy costs are almost double those in the region
- Taxes are considerably higher than in neighbouring countries
- Interest rates are also higher
- Volumes are small, because the car market keeps being squeezed whenever it starts to grow
"If you drop it to 15 percent without correcting that 34 percent cost disadvantage, the industry will collapse," he said at the time.
What the parts makers want instead
At the end of August PAAPAM put forward its own tariff plan for the new policy.
- 50 percent duty on completely built up cars
- 40 percent on parts that are already made in Pakistan
- 30 percent on completely knocked down kits
- 5 percent on locally produced raw materials
- Zero duty on imported raw materials
The 40 percent rate on localised parts is meant to stop assemblers from importing parts that a Pakistani vendor already makes. The gap between that plan and the draft's 15 percent end point shows how far apart the two sides still are.
What is at stake for local vendors
PAAPAM says it represents more than 1,200 tier one and tier two manufacturers. Earlier this month Mr Aizaz said locally produced cars contain up to 60 percent local parts by value, an average of about Rs 1.5 million per vehicle. He also warned that the wider opening to used car imports threatens 300,000 direct jobs and 1.5 million indirect workers. Mr Qadir has said the vendor sector accounts for roughly 80 percent of the jobs the auto industry creates.
Those numbers explain the alarm. Every car that arrives fully built, or every kit that arrives with more imported parts in it, takes value away from local suppliers.
The timing makes it harder
The tariff debate comes on top of other pressures on local vendors.
- Used car imports have risen sharply since June after rules were eased, which we covered in our report on the used import notification
- The country's car import bill is climbing, as shown in our story on the car import bill rising 36 percent
- The draft sets mandatory export targets for carmakers, a topic in our report on the export rules that could reopen WTO tensions with Japan
There has been one small win for vendors. In mid October the Economic Coordination Committee approved an extra 11 percent customs duty on 13 imported parts that are already made locally, including heavy vehicle tyres, windscreens and wheel assemblies. PAAPAM's worry is that the wider policy points in the opposite direction.
What it means for car buyers
Lower tariffs are one of the reasons the draft is expected to bring some car prices down. The flip side is that local suppliers support after sales parts, service and resale values. If more parts are imported, buyers may see cheaper cars at first but more exposure to the rupee and to shipping delays for spare parts later.
For the price side of the same policy, including the new levy on bigger petrol and diesel cars and the lower sales tax on EVs, read our guide to the Auto Policy 2026 to 2031 levy and EV tax. Carmakers have raised their own concerns too, as covered in PAMA's request to see the draft, and the IMF's role is explained in IMF objections to the auto policy. For the state of the market, see Pakistan car sales in September 2026, and browse current prices on our new cars page.
What happens next
The draft still needs IMF clearance and federal cabinet approval, and parts of it will need a bill in parliament. PAAPAM asked the Prime Minister earlier this month to share the reviewed draft with industry before it went to the IMF and the cabinet. Whether the final text gives vendors more protection, a slower path to 15 percent or more support funding is the key thing to watch. We will update this story when the cabinet decides.