Auto experts criticise draft policy for weak localisation measures

Auto experts have urged the government to formulate the upcoming auto policy 2026-2031 focusing on localisation-friendly initiatives with a view to strengthening assembling-cum-import strategy.

Auto analyst Zain Shariq said the proposed auto policy as defined is entirely anti-part manufacturing. The policy should be renamed as auto assembling and import policy because it has no measures to ensure localisation in Pakistan, he said.

He said additionally including Hybrid Electric Vehicle (HEV) in the 18% sales tax regime will punish HEVs even though they have higher localisation in some areas, and also reduce some level of emission. “Benefit should be directly linked to potential fuel saving, not on labels. The potential benefits are based on assumptions with zero integration of realities in the ground, and will lead to major deficits in the fourth and fifth year of the policy if not sooner,” he said.

Zain said export is treated as a given, whereas no measures to reduce structural costs of 34% are included.

He said further subsidising Electric Vehicle (EV) sales tax losses with Federal Excise Duty (FED) on internal combustion engine (ICE) is directly punishing those Original Equipment Manufacturers (OEMs) who have localised for the sake of those who are solely importing.

Another Pakistan Auto Industry Expert and Consultant Shafiq Ahmed Shaikh said he believed that the government’s earlier suggested auto policy 2026-2031 was a remarkable achievement because it was not only change of technology, but it will increase volumes, new technologies will be introduced, good FDI’s along with world reputed companies with their state of art plant are coming, job opportunities will increase, vendor development and their business will increase, import petroleum bill will come down and above all customer will get affordable, cheaper in rates but better in features world class Chinese cars.

“Owing to expected changes and amendments, this new policy will not only match national tariff board rates, but also disturb the main features of previous policy. For example, lower EV kit duties attract massive Foreign Direct Investment (FDI) from global EV pioneers. High localization targets ensure local engineering vendors capture high-value contracts for batteries, controllers, and electric motors. This structured economic pivot guarantees the survival of local industry while introducing next-generation green technology to Pakistan,” he said.

Shafiq said some assemblers are not in favour of initially made policy because they feel their sales will come down but in my opinion competition will increase and customer will be the beneficiary because the policy relies heavily on private investment instead of mandating a state backed support.

He said consumer credit banking policies will support purchaser and business of banks will also increase. The good exports will happen especially for Central Asian and African markets, he said.

While, he said, the policy brilliantly targets the reduction of Pakistan’s staggering petrol import bill.

The expert said through this Pakistan can secure an influential global footprint by transforming its vendor base into an export hub for EV components by focusing local vendors on producing high-demand EV components like wiring harnesses, electric motors, and copper-based parts by attracting global and specially Chinese EV giants to establish regional export hubs by leveraging Pakistan’s competitive engineering labor costs and by establishing specialized Special Economic Zones (SEZs) equipped with shared testing laboratories for advanced EV electronics.

“In my view, to utilize and new regional trade agreements to export Pakistani-made EV parts directly into emerging global green supply chains and attracting FDI into EV engineering things to local vendors and their production volumes will multiply, creating thousands of high-skilled tech jobs. This global integration creates economies of scale, driving down production costs so domestic consumers get state-of-the-art vehicles at much cheaper prices,” he said.

He said a flat 15% duty should be reconsidered as it will completely wipe out localised production and local parts manufacturers, if it will happen then may be nationwide and widespread factory closures would lead to immediate and massive unemployment across the auto industry will be expected. So, some difference with a win-win position is recommended, he added.

He said useful steps must be taken to market affordable, locally produced EVs by imposing a total ban on imported used, accidented and structurally compromised vehicles. He called for implementing mandatory digital cross-referencing of all vehicle identification numbers (VIN) and enforcing international crash-test benchmarks, airbags and as per WP 29 requirements of safety features on all local and entering vehicles.