Karachi/Brussels, (Unib Rashid) — Pakistan’s auto sector is facing growing concerns over weak localisation, as new vehicle assemblers appear increasingly reliant on imported components, while local vendors continue to voice strong reservations over limited domestic production.

With the current auto policy set to expire on June 30, industry stakeholders say new entrants have yet to provide any clear roadmap for future localisation. Although some large vendors have reportedly secured limited agreements with assemblers, the broader local industry has seen little meaningful benefit.

Official data shows that imports of semi- and completely knocked-down (SKD/CKD) kits surged by 116% year-on-year to $1.47 billion during the first nine months of FY2026. Meanwhile, the cumulative import bill for auto parts since FY2022 has exceeded $6 billion, highlighting the sector’s continued dependence on foreign components.

An official from Lucky Motor Corporation stated that the company has localised several components, including wiring harnesses, seats, bumpers, grilles, mufflers, batteries, carpets, and instrument panel reinforcements. Localisation in the Kia Sportage has reached around 35%, with a target to exceed 40%, while the Kia Picanto stands at approximately 40%.

However, industry sources note that some local vendors quote higher prices compared to imported parts, while others require assemblers to invest in tooling, making localisation commercially challenging.

Experts attribute the rising CKD/SKD imports to the launch of new models with low localisation levels, coupled with increasing demand for cars, SUVs, and pickup vehicles. While Japanese-brand vehicles assembled in Pakistan have localisation levels ranging between 50–70%, newer models reportedly remain below 50%.

Auto sector expert Mashood Ali Khan stated that local vendors are not receiving sufficient orders from new entrants, pushing the industry toward an assembly-based model rather than a manufacturing-driven one.

He further noted that rising demand for hybrid electric vehicles (HEVs), plug-in hybrids (PHEVs), and battery electric vehicles (BEVs)—estimated at 35,000 to 40,000 units annually—is largely being met through imported kits, limiting growth opportunities for Pakistan’s industrial base, particularly small and medium enterprises (SMEs).

Experts warn that Pakistan’s IMF-supported economic framework is gradually steering the auto sector toward an import-led model, raising serious concerns about long-term sustainability. While such policies may offer short-term economic stability, they risk undermining local manufacturing, technological development, and job creation.

They emphasized that the upcoming auto policy must include strict definitions and monitoring of CKD/SKD imports, enforce time-bound localisation targets, link incentives to actual technology transfer and local investment, and ensure protection for domestic auto parts manufacturers to build a sustainable and competitive industry.