ISLAMABAD: The Competition Commission of Pakistan (CCP)’s Study on Automobile Sector has questioned the true implementation of the Auto Industry Development and Export Policy (AIDEP) 2021-26, stating that while production capacity has expanded significantly, deeper structural and export goals remain largely unmet.
Launched to provide long-term stability after earlier policy gaps disrupted localisation and investor confidence, AIDEP set ambitious annual capacity targets: 650,000 cars, LCVs and SUVs; 100,000 tractors; 20,000 heavy commercial vehicles (HCVs); and 7 million two and three-wheelers by 2026.
According to data cited in the CCP study, installed capacity for cars, LCVs and SUVs has now reached 624,074 units per year, with projections suggesting it may exceed the 650,000-unit target by the end of the policy period. Thirteen new entrants have begun operations, and 23 new models compliant with international WP-29 safety standards have been introduced.
However, the Commission notes that capacity expansion alone does not translate into competitiveness. Actual production continues to fluctuate well below installed capacity, limiting economies of scale. Localisation gains remain concentrated in low to mid-value components, while engines, transmissions and advanced electronics are still largely imported.
Export performance has also lagged behind policy aspirations. Despite mandatory requirement for OEMs to export up to 10 percent of the C&F value of imports by 2026, progress has been uneven. Structural disadvantages — including high energy costs, imported raw materials, lack of domestic testing facilities, and absence of export rebates — continue to constrain competitiveness.
The CCP concludes that while AIDEP provided a structured modernisation roadmap, inconsistent implementation, funding gaps, tariff uncertainty and macroeconomic instability have diluted its impact. Sustainable growth, the study argues, will require predictable policies, export-enabling infrastructure, and stronger institutional coordination to turn capacity expansion into real industrial transformation.
Copyright Business Recorder, 2026
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