PAKISTAN’S automobile industry is at a critical juncture. Sharp cuts in tariffs on the import of completely built vehicles in the current budget, risk weakening the domestic auto manufacturing base. The issue is whether policymakers want to strengthen local auto engineering or cede the market to imports. Consumers deserve lower prices but through greater local competition, and not policies that weaken industrial development. With assembly plants operating below capacity and parts manufacturers struggling, abrupt liberalisation would weaken the domestic automotive value chain. Local manufacturing depends on economies of scale, ongoing investment in technology, and predictable policy. Successful automotive hubs in Asia nurtured domestic production with carefully sequenced protection, while demanding greater localisation and higher quality standards.

We should adopt a similar approach. A stable, long-term auto policy can reassure investors while linking tariff protection to measurable performance. Assemblers should be required to deepen localisation, invest in R&D, improve quality and expand exports in return for continued protection. Such a strategy would strengthen the vendor industry, create skilled employment and reduce dependence on imported parts. There is also the issue of incentives. The government’s willingness to provide tax relief for hybrid and plug-in hybrid vehicles — too costly for ordinary households — raises concerns. Cleaner transport is a worthy aim but incentives should not disproportionately benefit buyers of premium hybrid vehicles, while middle-income families are priced out of the market. A balanced approach would direct fiscal support towards small, locally assembled cars. Such steps would stimulate demand where it matters most, increase production, boost local auto vendors and generate jobs across the manufacturing chain. They would also complement environmental goals by encouraging the replacement of older, less efficient vehicles with modern, lower-emission alternatives. Industrial policy is ultimately about choosing where scarce public resources deliver the greatest long-term return.

Published in Dawn, August 6th, 2026