Auto parts makers seek review of Auto Policy 2026-31

PAAPAM urges PM Shehbaz Sharif to review proposed tariff cuts and new-energy vehicle concessions, warning of threats to 1,200 local manufacturers and Rs700 billion in domestic component supplies The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has urged Prime Minister Shehbaz Sharif to review the proposed Auto Policy 2026-31 , warning that lower import duties on vehicles and components, alongside incentives for new-energy vehicles, could weaken domestic manufacturing and threaten employment. In a letter dated October 23, PAAPAM Chairman Abdul Rehman Aizaz said the domestic auto parts industry comprised more than 1,200 companies, supported approximately 1.5 million jobs and contributed $1.8 billion annually through import substitution. The association said local manufacturers supplied components worth Rs700 billion to vehicle assemblers and warned that easier access to imported vehicles and parts could undermine investments in domestic production. PAAPAM has requested a meeting with the prime minister to present alternative proposals before the policy is finalised. The draft policy proposes phased reductions in import tariffs, export-linked incentives and preferential tax treatment for new-energy vehicles as the government seeks to increase competition and develop the automotive export market. Read This: Pakistan plans tax relief for electric vehicles, higher levies on petrol cars under new auto policy It targets cumulative exports of $6 billion in vehicles and automotive components by 2030-31, with incentives for manufacturers achieving export targets and penalties for those failing to meet them. Proposed sales tax rates include 1% for battery-electric vehicles, 6% for range-extended electric vehicles and 9% for plug-in hybrids, subject to approval. The proposals have exposed differences among domestic parts suppliers, established vehicle assemblers, importers and manufacturers investing in electric and hybrid technologies. While importers favour lower trade barriers, local manufacturers are concerned that cheaper imported components and completely built-up vehicles could reduce demand for domestically produced parts. The debate comes as Pakistan's automotive market undergoes changes, with Chinese manufacturers introducing new models and technologies into a sector historically dominated by Japanese companies, including Suzuki, Toyota and Honda. The growing presence of conventional, hybrid, plug-in hybrid, battery-electric and range-extended vehicles has also complicated the industry's position on taxation, localisation and investment incentives. A senior official of a Japanese automobile manufacturer said the industry no longer had a unified position because manufacturers and suppliers were increasingly pursuing different technologies and commercial strategies. He said rapid liberalisation could damage local production and employment, while excessive protection could restrict competition and maintain high vehicle prices. Industry stakeholders said the proposed tariff reductions could increase competition and consumer choice, but their impact would depend on whether lower import costs translated into affordable vehicles and whether domestic suppliers could remain competitive. They also emphasised that long-term policy stability, higher domestic value addition and measurable export growth would be necessary to reduce the industry's dependence on protection and support future investment.