Auto sector’s struggle persists despite growth potential

KARACHI: Pakistan’s automotive sector continues to face structural challenges, including policy inconsistency, low capacity utilization, and rising reliance on used car imports, even as it retains significant growth potential within the regional market.

These issues were discussed during a recent industry engagement hosted by Indus Motor Company, where company leadership shared insights on market trends and policy direction with a group of media representatives.

During the session, Chief Executive Officer of Indus Motor Company, Ali Asghar Jamali, presented insights into Pakistan’s automotive performance relative to regional peers. Pakistan remains one of only 16 countries worldwide capable of manufacturing passenger cars, light commercial vehicles, trucks, and buses.

Seven of the top ten global automotive brands now operate in Pakistan, positioning it as a potential investment destination for original equipment manufacturers.

Highlighting 10-year market trends across Asia, Jamali compared Pakistan with India, the Philippines, and Vietnam. While India’s automotive market grew by 60 percent over the past decade, and the Philippines and Vietnam recorded growth of 71 percent and 180 percent respectively, Pakistan’s growth remained at 15 percent, reflecting the impact of inconsistent policies, excessive used car imports and frequent regulatory changes.

The automotive sector currently contributes approximately 2.8 percent to Pakistan’s GDP and provides employment to around 1.8 million people.

Despite the presence of 31 global brands, only 30 percent of the installed production capacity of 600,000 vehicles per year is being utilized, compared to 84% utilization in 2017–2018, he said, terming high share of used car imports, frequent policy shifts, and a complex taxation structure as key contributing factors.

Jamali expressed his sincere appreciation to Haroon Akhtar, Special Assistant to the Prime Minister on Industries and Production, Saif Anjum, Federal Secretary of the Ministry of Industries and Production, and Hamad Ali Mansoor, CEO of the Engineering Development Board, for their concerted efforts in abolishing the baggage scheme for used car imports. He noted that this landmark policy decision marks a significant step toward strengthening Pakistan’s local automotive manufacturing sector.

By discouraging the influx of used vehicles, the initiative is expected to enhance demand for locally assembled cars, support industrial growth, generate employment and effectively reduce idle production capacity within the country’s automotive industry.

Addressing concerns around foreign exchange, the company noted that local vehicle assembly accounts for just 2.08 percent of total imports, according to data from the State Bank of Pakistan. In contrast, imports of Completely Built-Up (CBU) vehicles have increased from 0.03 percent in 2023 to 0.78 percent in 2026.

Comparatively, the automotive manufacturing sector’s share in import bills stands at 15.4 percent in the United States, 11.5 percent in the United Kingdom, 10.2 percent in Germany, 5.1 percent in Japan, 3.2 percent in China, and 3 percent in India.

Jamali emphasized the need for a stable, long-term automotive policy framework for 2026–2031, with minimal amendments, to support localization and protect existing investments.

He stated that Indus Motor Company will await the Government of Pakistan’s policy announcement and will accordingly formulate its strategy in alignment with the policy direction.

The company maintains a comprehensive range of solutions tailored to the Pakistani market, which will be implemented in line with the Government’s policy framework.

He also highlighted Toyota’s contributions in Pakistan over the past 35 years, including investments of USD736 million, with an additional USD300 million planned over the next five years.

The company has contributed USD6.3 billion in taxes and helped prevent USD6.5 billion in foreign exchange outflows through localized production. Its ecosystem, including dealerships and vendor networks, supports employment for over 55,000 individuals.

Indus Motor Company’s manufacturing facility operates in line with Toyota’s global quality standards, including recognition by Toyota Motor Corporate Japan as a “Zero Defect Facility” in Asian plants.

The company also manages the country’s largest sheet metal parts plant and a 6.6-megawatt roof-mounted solar power system.

Jamali said that consistent policies, investment-friendly financing mechanisms, and a stronger focus on localisation are critical to improving capacity utilisation, attracting foreign investment, and positioning Pakistan’s automotive sector as a driver of sustainable economic growth.

Copyright Business Recorder, 2026