ISLAMABAD: Pakistan’s push to double a proposed automotive export target under a new five-year auto policy currently being finalized will be difficult to achieve unless the government tackles high production costs, limited market access and other structural constraints, industry executives told Arab News this week.

The proposed Automobiles and Auto Parts Manufacturing Policy 2026-31 seeks to shift Pakistan’s largely assembly-focused industry toward greater competition, exports and local manufacturing while aligning it with the National Tariff Policy 2025-30, which envisages gradually lowering tariffs on industrial inputs.

But parts manufacturers say proposed tariff changes, particularly for new energy vehicles, could undermine localization by making imported components more attractive than parts already manufactured in Pakistan.

“The auto parts industry is very concerned that information coming out regarding the draft of the auto policy could lead to a rollback of localization,” Aamir Allawala, CEO of Transsion Tecno Motors and a former chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), said.

He said that allowing new energy vehicle assemblers to import components already manufactured in Pakistan at lower duties than those applicable to conventional vehicles could encourage manufacturers to replace locally produced parts with imports.

“This will mean that the market will transition from conventional vehicles, which have 50 to 60 percent local parts, to new energy vehicles which have zero percent localization,” he said.

Allawala said Pakistan should instead use the transition to new energy vehicles to deepen its engineering and manufacturing base while encouraging vehicles with higher local content.

He said efforts to boost automotive exports were also being held back by broader structural problems, ranging from security concerns and limited access to overseas markets to high production costs and a lack of export incentives.

“Lack of security in Pakistan is a reason why buyers from the US and EU are unable to visit their Pakistani suppliers to conduct factory audits, quality evaluation and dispute resolution,” he said.

Allawala noted that Pakistan’s limited trade agreements also put exporters at a disadvantage in markets such as Africa, where Pakistani auto parts can face tariffs of 25 percent while competing products from some countries enter duty-free.

He also cited electricity, interest and taxation rates that he said were high compared with regional competitors, while countries including India provided incentives for automobile component exports.

“Enhancement or achievement of the export targets is possible only after addressing these structural constraints which are out of control of the auto parts industry,” he said.

The government has been reviewing the new auto policy for several months, with a committee led by Energy Minister Awais Leghari holding over a dozen sessions with economists and industry stakeholders as it seeks to balance greater competition with support for domestic manufacturing.

The draft policy is expected to be shared with the International Monetary Fund before being submitted to the federal cabinet for approval.

Razi-ur-Rahman, director general of the Pakistan Automotive Manufacturers Association (PAMA), welcomed the government’s ambition to increase exports but said targets alone would not deliver results.

“It is a very good decision by the government to enhance automotive exports, but this cannot be done by desire alone,” he said. “It depends on how the government will support this initiative.”

“The entire industry wants to increase exports,” he added. “Which businessman would not like that?”

Rahman also said Pakistan’s auto industry already had substantial levels of local content in several major vehicle brands.

“If you look at Toyota and Honda cars, 65 percent of the parts are locally made,” he said. “Suzuki uses an even greater percentage of local parts.”

He pointed to neighboring India and China as examples of countries where sustained state backing had helped create globally competitive automotive industries.

“If neighboring India has become a powerhouse of the auto sector through exports, it is a result of full government support,” Rahman said.

“Without government support, huge success is not possible,” he added.