KARACHI: Pakistan recorded an all-time high import of semi- and completely knocked-down (SKD/CKD) kits by local auto assemblers of over $2 billion in FY26, signalling either low localisation in new and old models amid robust auto sales.
As the local industry awaits the new auto policy after the current policy expires on June 30, followed by changes in taxes and duties in the budget 2026-27 and other policy initiatives, auto sales may remain upbeat in the coming months, in view of a 92pc increase in the import of CKD/SKD kits to $2.118bn in FY26, from $1.101bn in FY25.
Sales of cars in FY26 stood at 155,631 units, while SUV, pickup, van, and jeep sales totalled 50,814 units.
The previous all-time high import of parts and accessories by the assemblers was $1.7bn, recorded in FY22, when car sales stood at 234,180 units, followed by SUV, jeep, and van sales at 45,087 units. Total import bill of SKD/CKD has crossed over $6bn dollars from FY22 to FY26.
Part makers demand tariff review; auto loans surge amid robust sales
Old assemblers claim localisation levels between 50-70pc, but many vendors argue that local parts in new models they are introducing are less than 50pc. Some new players, especially Korean assemblers, claim localisation of 35-40pc, while Chinese players are not ready to share their localisation.
State Bank of Pakistan’s foreign exchange reserves remain under pressure below $18 billion as of July 10.
In the current situation, it is critical that we utilise foreign reserves wisely. An open import policy is not in the national interest and will further strain the economy, said Mashood Ali Khan, auto parts maker and exporter.
To protect local industry and conserve foreign exchange, the National Tariff Policy must be reviewed immediately, he said, adding that a balanced tariff structure is essential to support domestic manufacturing, reduce unnecessary imports, and ensure long-term economic stability.
Pakistan’s local auto parts manufacturers are facing severe challenges due to the increasing import of SKD/CKD kits.
“This trend is alarming for the survival of Small and Medium Enterprises in the auto sector. If the situation continues, many SMEs will be forced to shut down their plants,” he said.
Under the last automotive policy, the government gave Korean and Chinese OEMs the opportunity to operate under a 25pc tariff regime. “Unfortunately, we have not seen these OEMs develop new local auto parts vendors or source from existing manufacturers,” Mashood said.
In the past, this same model helped Japanese OEMs develop over 100 local auto entrepreneurs in Pakistan. “Today, if this continues, not only will small entrepreneurs be wiped out, but thousands of middle-class families dependent on this sector will also be severely impacted,” he said.
The main concern is that new Korean and Chinese OEMs are not sourcing from local manufacturers. We have already seen this pattern before: when old models were discontinued, many local enterprises closed due to lack of orders for new models, he said.
A similar pattern is now emerging in the bus and truck OEM segment, where parts are being imported under CKD and SKD, he said.
“It is therefore critical that the government reviews the upcoming automotive policy. The policy must prioritise local procurement instead of allowing unchecked CKD and SKD imports,” he said.
The current SKD policy, based solely on sub-assembler prices rather than localisation, has already damaged the industry over the last decade.
Given existing funding constraints, the local industry is not in a position to compete with massive imports of CBUs, CKDs, and SKDs. If this is not controlled, Pakistan risks losing its auto manufacturing base within the next decade, as happened in Australia, Mashood feared.
Auto loans rise
Outstanding auto loans surged for the 19th consecutive month to Rs382bn at the end of June from Rs369.12bn in May despite an increase in interest rate to 11.5 per cent in April from 10.5pc, data released by the State Bank said.
It seems that pre-budget buying has further propelled demand for both used and new vehicles, as buyers may have rushed to purchase vehicles, fearing changes in the budget.
Even the US-Israeli war on Iran since Feb 28, which has intensified recently, has yet to dampen buyers’ enthusiasm for purchasing new and old vehicles. Even buyers are not worried about a slight increase in financing.
Various packages by assemblers and private banks on affordable car financing are also luring buyers towards new vehicles.
Some auto stakeholders believe that the car financing limits should increase from Rs3 million to Rs6 to Rs8m, while the repayment tenure should also be extended from 3-5 years to five to seven years, along with a reduction in sales tax on small cars.
Published in Dawn, July 19th, 2026