Islamabad — Pakistan risks missing out on a $131 billion regional automobile trade corridor due to abrupt tariff changes and the growing normalisation of used-car imports, warns a new report by the Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM).
The report highlights that even a 5% share of this market could bring Pakistan $6.5 billion in annual auto exports — nearly 70 times higher than current levels. Yet, decades of progress in building an auto-parts ecosystem is now at risk.
Pakistan’s auto industry currently supports 1.83 million jobs and saves $1.25 billion annually in import substitution through localisation. More than Rs100 billion has been invested in tooling and production facilities by over 1,200 Tier-1, Tier-2 and Tier-3 suppliers. But with motorisation at just 20 cars per 1,000 people — far below regional peers — low volumes continue to undermine economies of scale.
The report warns that recent tariff flattening, which allows broad semi-knocked-down kits to be imported at raw material duty rates, has put local vendors at a disadvantage. Assemblers can bypass domestic producers while vendors still pay around 15% on their inputs. Meanwhile, used-car imports already capture up to 25% of sales in weak years, starving local manufacturers of volumes.
PAAPAM also criticised IMF-backed recommendations to flatten tariffs and liberalise used-car imports, warning such measures could dismantle localisation incentives, cause plant closures, and trigger job losses.
Instead, the report urges reforms that preserve cascading tariffs, develop testing facilities, regulate used-car inflows, and expand auto-financing to boost demand. Without these steps, Pakistan risks losing not only potential exports but also the industrial base that anchors its economy.
