Pakistan’s automobile industry is undergoing an intriguing transformation. During the last financial year, total locally assembled car sales were one-third of the industry’s capacity, around 175,000 units sold against an installed capacity of roughly 550,000. Meanwhile, used car imports are opening, yet new assemblers are entering the market (including BYD and others), and existing players are introducing new brands. On the surface, this defies economic logic, but there is method to the madness.
Demand is shifting toward NEVs (new energy vehicles) and crossovers, while most of the current production continues to cater to sedans in the internal combustion engine (ICE) segment. Consumers are increasingly preferring Chinese brands, which lead the NEV market, while most of the existing local assembly focuses on Japanese and Korean cars.
Korean players are now blending in Chinese crossovers and SUVs. Nishat Group has launched two new Chinese brands, and Lucky Motors is in talks with two others to introduce in Pakistan. Both groups are looking to utilize their existing capacities, as their Korean brands are struggling.
After the 2016–21 auto policy, one of the first crossover successes was MG, a British brand acquired by Chinese investors. However, supply disruptions due to Covid lockdowns, coupled with a lack of foresight from local partners, caused the brand to lose consumer confidence.
The trendsetter has been Haval, a Great Wall Motors brand introduced by Sazgar Engineering in Pakistan. The local firm, long involved in three-wheeler manufacturing, managed to capitalize on both the greenfield and NEV four-wheeler policies, while others focused primarily on the former. Haval’s success in Pakistan has even surprised the Chinese parent company. Many other Chinese players are now eyeing the Pakistani market, and local assemblers are following suit. That is why Nishat and Lucky are venturing into Chinese brands.
Mega Motors (a Hubco venture) is in the process of setting up a local assembly plant, expected to begin producing BYD vehicles in the last quarter of 2026. Bestway Cement is also entering the auto sector, with industry grapevine suggesting that it is acquiring the old Proton plant, likely to assemble Chinese vehicles.
The story is simple: consumer preference is driving the change. Another interesting point, especially for Chinese cars, is that the cost of imported completely built units (CBUs) is lower than that of locally assembled completely knocked down (CKD) units. The only incentive to assemble locally is duty protection. And Pakistan cannot export Chinese brands, as it is cheaper for other countries to import directly from China. Localization in NEVs will remain low, given the fewer number of moving parts.
Ideally, duties should be rationalized, as envisioned in the National Tariff Policy (NTP), which proposes a significant reduction in duty protection over five years, if implemented. Pakistan does not hold any comparative advantage in local assembly. Why make a capital investment of $100–200 million in an assembly plant, import expensive CKDs, and sell locally? Without local assembly, there would be less foreign exchange strain, and capital could be invested in sectors where Pakistan has a genuine competitive edge. The only real argument for assembly is job protection in OEMs and parts manufacturers.
Meanwhile, the IMF is pushing Pakistan to allow used car imports. Existing players believe this could be the end of local manufacturing. “Automobile assembling may finish in Pakistan if used car import is opened,” lamented Ali Tabba, Chairman of Lucky Motors. “We will sell used Toyota cars by giving warranty and certification,” said Ali Jamali, CEO of Indus Motors. Honda may follow the same path.
They not only fear competition from used cars but are also wary of the Chinese revolution. Suzuki, on the other hand, may not face stiff competition, as China is not focusing on smaller cars. However, the used car market is an ever bigger threat to Suzuki.
One might wonder why Mega Motors (BYD) is investing in a new plant, when it could have acquired or co-utilized an existing one. They had an offer but declined. Bestway, on the other hand, might be making the smarter move. Buying an old plant is cheaper, and the risks are lower, especially when local assembly faces an existential threat.
Regardless, a major disruption is underway in the industry. Pakistani business groups are flush with liquidity but lack ideas for investment. That is why they are going big on NEVs. The market will soon be flooded with Chinese cars, and not all players will survive. There will be a bloodbath, and only a few will thrive.
In Pakistan, a strong local partner with manufacturing experience is essential. Some players will fizzle out. Even in China, projections suggest that only 10 to 15 of the current 128 automakers will survive. These survivors might eventually dominate the Pakistani market too. Pakistan was among the fastest countries in the world to adopt solar energy through Chinese imports. A similar trend could play out in the auto sector.
Crossovers are a new phenomenon in Pakistan. Their market share was less than 5 percent in 2018 and has grown to 23 percent in FY25. This transition is being captured by Chinese players. The time is not far when China may begin dumping cars in Pakistan, just as it did with solar panels and is now doing with batteries.
With or without the NTP, a price war is inevitable. The Chinese do not have skin in the game; they will sell as much as they can. Car prices in Pakistan are likely to fall, and local partners may begin offering attractive financing options to lure consumers into upgrading their vehicles every three to four years. The only potential roadblock is Pakistan’s balance of payments crisis. Nonetheless, with or without it, the automobile market is on the brink of major disruption.
Copyright Business Recorder, 2025
Ali Khizar is the Director of Research at Business Recorder. His Twitter handle is @AliKhizar
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