ISLAMABAD: As the federal government continues consultations with stakeholders on the proposed Auto Industry Development and Export Policy (AIDEP) 2026-31 under the supervision of Deputy Prime Minister and Foreign Minister Ishaq Dar, concerns are emerging from industry experts and policy analysts that the draft framework may largely protect established automobile assemblers while falling short of facilitating competition, exports and the transition towards electric vehicles (EVs).
The policy, which remains under discussion and has not yet been made public in its final form, is being reviewed through a series of meetings involving government officials, automobile manufacturers and other stakeholders. However, details of the draft have largely remained out of the public domain, prompting calls from economists and trade experts for broader consultation before its final approval.
According to analysts familiar with the deliberations, the proposed policy appears to continue a protection-oriented approach that has historically benefited local assemblers, particularly companies associated with Japanese automotive brands that dominate Pakistan’s passenger vehicle market.
“The framework appears to prioritise protection of existing assembly operations rather than creating a competitive ecosystem capable of attracting new investment, boosting exports and accelerating EV adoption,” said an economic analyst who requested anonymity due to the sensitivity of the ongoing consultations.
Concerns over tariff structure
Policy observers argue that while the draft seeks to introduce a simplified tariff regime and provide policy certainty for five years, the structure may continue to favour conventional internal combustion engine (ICE) vehicles over electric mobility.
They contend that despite global shifts towards EVs, the proposed measures do not offer sufficient fiscal incentives for battery technologies, EV components and charging infrastructure. Instead, they say, the draft maintains protections for existing vehicle assembly operations through tariff arrangements that could discourage greater competition.
Industry experts note that countries seeking to accelerate electrification have typically adopted aggressive incentives for EV production and imports, while Pakistan’s proposed framework appears more cautious in its approach.
“The world is moving rapidly towards electric mobility, but the policy does not appear to reflect the urgency required to position Pakistan within future automotive supply chains,” said another analyst.
Questions over IMF alignment
Economists have also pointed to a potential disconnect between the draft policy and broader economic reforms advocated by international financial institutions.
Pakistan’s ongoing engagement with the International Monetary Fund (IMF) has included commitments related to tariff rationalisation, market liberalisation and reducing distortions created by protectionist policies.
Analysts argue that maintaining extensive tariff protections for local assembly operations may complicate efforts to align industrial policy with wider economic reform objectives.
“There is an inherent tension between protecting selected industries and pursuing the trade liberalisation measures repeatedly sought by international lenders,” a former government official familiar with economic policymaking observed.
Regulatory mandate under scrutiny
Another issue being raised concerns the proposed allocation of technical standards and compliance responsibilities.
Policy experts argue that while the Engineering Development Board (EDB) plays an important role in industrial promotion and sectoral development, technical standard-setting and conformity assessment functions traditionally fall within the mandate of the Pakistan Standards and Quality Control Authority (PSQCA).
They warn that assigning both promotional and oversight responsibilities within the same institutional framework could create regulatory challenges and potential conflicts of interest.
Supporters of this view maintain that vehicle safety certification, emissions standards and technical compliance should remain under an independent standards authority to ensure credibility and international recognition.
Export targets missing
Analysts also question the draft’s ability to support the government’s stated objective of export-led growth.
Despite repeated emphasis by Prime Minister Shehbaz Sharif on expanding exports to strengthen the economy, critics say the policy does not appear to contain sufficiently strong mechanisms linking incentives and tariff concessions with export performance.
Pakistan’s automobile sector remains heavily dependent on imported components and CKD kits, while vehicle exports remain negligible compared to regional competitors.
“Without measurable export obligations attached to fiscal incentives, the industry may continue relying on domestic protection rather than developing global competitiveness,” an industry observer said.
Lessons from international models
Several experts have pointed to countries such as Morocco as examples of successful automotive industrialisation strategies.
Rather than focusing solely on vehicle assembly, Morocco developed an export-oriented ecosystem centred on automotive components, attracting major global manufacturers and integrating itself into international supply chains.
Analysts argue that Pakistan’s policy framework should place greater emphasis on developing a globally competitive auto-parts sector capable of generating export earnings and employment opportunities.
Industry’s likely position
Representatives of local assemblers have consistently maintained that policy stability and protection against sudden import surges are essential for sustaining investment, localisation and employment in Pakistan’s automotive sector.
Industry stakeholders argue that long-term tariff certainty encourages capital investment and supports the development of local vendor networks.
However, critics counter that decades of protection have produced limited export capacity and have often resulted in higher prices for consumers.
Government yet to finalise policy
Officials involved in the consultation process maintain that discussions are ongoing and that stakeholder feedback is still being incorporated before the policy is finalised.
Sources said the government is expected to continue consultations in the coming weeks before submitting the draft for final approval.
As debate intensifies, economists and industry observers are urging policymakers to ensure that the final framework promotes competition, accelerates EV adoption, strengthens exports and aligns with Pakistan’s broader economic reform agenda rather than simply extending protections for established market players.
