PAMA Seeks Tariff Reforms to Protect Auto Industry

The Pakistan Automotive Manufacturers Association (PAMA) has urged Prime Minister Shehbaz Sharif to immediately address tariff distortions introduced through the Finance Act, 2026, warning that the revised import duty structure now places locally assembled vehicles at a competitive disadvantage by making imports of fully built vehicles and commercial parts comparatively less expensive.

In a formal representation submitted to the Prime Minister, PAMA Director General Abdul Waheed Khan stated that the automotive sector is confronting a growing policy challenge that could adversely affect industrial growth, employment, investment, localisation efforts, and Pakistan’s broader manufacturing economy.

PAMA, which represents 16 vehicle assemblers manufacturing more than 100 models across 31 international automotive brands, stated that despite prolonged market contraction and multiple regulatory challenges in recent years, the domestic industry has continued to maintain average annual production of approximately 250,000 vehicles.

The association further highlighted that cumulative investment under successive automotive policies has exceeded US$5 billion, while the industry and its supporting vendor network collectively provide livelihoods to nearly 2.5 million Pakistani families.

According to PAMA, the tariff structure introduced under the Finance Act, 2026 has created an imbalance whereby Completely Built Units (CBUs) and commercially imported auto parts are now subject to lower import duties than Completely Knocked Down (CKD) kits, which serve as the primary input for domestic vehicle assembly.

The association noted that imported CBUs in the small vehicle segment, including vehicles below 850cc, are now liable to lower customs duties, while commercially imported parts attract a 25% customs duty. In contrast, CKD kits imported by local assemblers are subject to a combined 32% duty, comprising 30% customs duty and an additional 2% duty.

Industry representatives also pointed out that several locally manufactured components continue to attract duties of up to 46%, creating a tariff framework that discourages localisation, domestic value addition, technology transfer, and investment in Pakistan’s automotive supply chain.

PAMA warned that the reduced import duty on CBUs below 850cc has significantly undermined the commercial viability of domestic manufacturing in the entry-level vehicle segment and could reverse decades of progress achieved in developing Pakistan’s local vendor ecosystem.

The association cautioned that the prevailing tariff disparity may render domestic manufacturing of vehicles and components economically uncompetitive, disrupt local vendors, discourage future investment, and jeopardise employment opportunities across the automotive value chain.

The letter further highlighted that uncertainty surrounding the government’s forthcoming Auto Industry Policy continues to create ambiguity regarding the long-term tariff and regulatory framework applicable to the sector.

According to industry stakeholders, the absence of policy clarity has negatively affected strategic business planning, including pricing strategies, production planning, localisation initiatives, and future investment decisions.

PAMA has requested the Prime Minister to facilitate an early resolution of policy differences among the government's commerce, revenue, and industry authorities and to rectify the existing tariff anomalies to restore investor confidence, strengthen industrial competitiveness, and protect Pakistan’s domestic manufacturing base.

Separately, an auto assembler informed that the General Sales Tax (GST) applicable to Hybrid Electric Vehicles (HEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) has been increased from 8.5% to 25%.

According to the assembler, the higher GST is expected to increase the retail prices of locally assembled hybrid vehicles by approximately 15%, equivalent to an estimated Rs1.5 million to Rs1.8 million per vehicle, potentially reducing consumer demand by weakening the financial benefits associated with fuel-efficient hybrid technology.

PAMA reiterated that Pakistan’s automotive industry has played a significant role in promoting industrial investment, localisation, technology transfer, employment generation, and economic development, while warning that prolonged policy inaction could have lasting consequences for the country's manufacturing sector.