Pakistan’s economic managers deserve recognition for the measured steps taken toward macroeconomic stabilisation. The preparation of the next five-year Auto Policy presents an equally consequential opportunity — one that must be matched by the kind of informed, evidence-based decision-making that the moment demands. On one critical question, however, a serious blind spot has emerged, and the window to correct it is narrowing.
The Stakes of Localisation
Over the past four decades, more than 1,200 auto parts manufacturers have invested approximately two billion dollars into plants, machinery, and tooling across Pakistan. The sedan segment alone has achieved up to 65 percent local content, with over 5,000 parts produced domestically for 150,000 vehicles annually. This generates nearly one billion dollars in annual import substitution and sustains the livelihoods of 1.5 million Pakistani families. These gains were not handed down from a policy document. They were built, part by part, across generations — and they were built after the nationalisation era of the 1970s left the sector in ruins. This is not a legacy industry coasting on inherited protection. It is a living economic ecosystem that took forty years to assemble.
A Pattern the Data Already Confirms
The government is considering rationalising duties on Range Extenders and Plug-in Hybrid Electric Vehicles by more than 90 percent — from Rs 1.5 million to Rs 100,000 per vehicle. Before committing to that course, policymakers would do well to examine what happened the last time a similar logic was applied. Since 2016, import duties on CKD kits were reduced and tariffs on localisable parts slashed from 46 to 25 percent. Over the following decade, local parts manufacturers saw up to 90 percent of their business eroded. Greenfield policy beneficiaries, meanwhile, showed negligible localisation. The country absorbed the industrial cost. Importers captured the commercial gain. There is no reason to believe the outcome will differ this time if the same structural incentives are replicated.
Extending comparable concessions to PHEVs and Range Extenders — vehicles that continue to rely heavily on conventional powertrain components — risks triggering precisely the same destructive cycle. When manufacturers can import at drastically reduced duty levels without meaningful localisation obligations, the domestic sourcing incentive collapses. Supply chains that took decades to build can unravel within a single product cycle.
The Environmental Argument Does Not Hold
Proponents of the proposed duty relaxation frequently invoke the green transition as its justification. The argument deserves scrutiny. PHEVs and Range Extenders are not zero-emission vehicles. They are hybrids, straddling old and new technology, retaining significant dependence on combustion engine components. Granting them near-blanket duty relief while leaving combustion engine localisation structurally exposed is neither environmentally coherent nor economically defensible. If Pakistan’s stated policy objective is zero-emission mobility, the logical beneficiary of preferential treatment is the Battery Electric Vehicle — not the PHEV, whose duty relaxation, in practice, primarily benefits importers rather than the domestic manufacturing base.
A Workable Framework Already Exists
The industry’s position, articulated by the Pakistan Auto Parts Manufacturers Association, is neither protectionist nor unreasonable. The ask is specific: no concessions in sales tax or import duties that risk triggering localisation rollback. A tariff differential of at least 15 percent between localised and non-localised parts, combined with a minimum 25 percent duty on non-localised CKD kits, would preserve the economic logic of domestic sourcing without penalising the transition to cleaner technology. The framework is calibrated. It is implementable. And it is consistent with the industrial policies of every major automotive economy that has successfully managed a technology transition without sacrificing its supplier base.
As Shehryar Qadir, Senior Vice Chairman of PAAPAM, has noted: “The issue is not whether Pakistani vendors can manufacture EV-relevant parts. The issue is why new entrants are not being meaningfully encouraged or obligated to source these components locally.”
The Strategic Stakes
Pakistan’s next Auto Policy will define its most strategically important industrial sector for the following decade. Policymakers must weigh the evidence carefully. Short-term lobbying, however fluently it adopts the language of green transition, cannot be allowed to set the terms of a decision with this magnitude of consequence. A two-billion-dollar industrial base, 1.5 million livelihoods, and forty years of accumulated supply chain capacity are not abstractions on a policy brief. They are the foundation on which any credible automotive future in this country must be built. Rationalise duties thoughtfully. Incentivise genuine electrification. And protect what four decades of industrial effort have constructed — because once it is gone, no subsequent policy will bring it back.
Khawar Azhar — The writer contributes on issues of public interest.
