Pakistan’s current IMF-supported economic framework is gradually steering the country toward an import-led auto industry, raising serious concerns about long-term industrial sustainability. While such policies may provide short-term macroeconomic stability, they risk undermining local manufacturing, technology development, and employment generation.

The auto sector, instead of evolving into a localized manufacturing base, is increasingly shifting toward an assembly-driven model. Rising consumer demand for greener mobility—hybrid electric vehicles (HEVs), plug-in hybrids (PHEVs), and battery electric vehicles (BEVs)—estimated at 35,000 to 40,000 units annually in key segments, is largely being met through imported CKD and SKD kits. This trend reduces domestic value addition and limits the growth potential of Pakistan’s industrial ecosystem, particularly SMEs, which collectively employ millions across the country.

A comparison with China highlights the policy gap. Chinese automotive success is not based on frequent model launches, but on deep localization, scale production, and strong state-backed industrial policy. Brands such as Deepal, Changan, Haval, and BYD have achieved significant production volumes through 70–90% localization, robust vendor ecosystems, and vertical integration. For example, the 2024 facelifted Haval H6 has exceeded 4 million global sales, while the officially launched in mainland China on March 26, 2024,BYD Atto 2 recorded over 267,000 units within its first year of launch. These achievements are rooted in consistent policy enforcement and domestic capacity building.

In contrast, Pakistan’s experience over the past decade has been marked by stagnant localization levels. New entrant OEMs, despite policy commitments, have largely relied on CKD/SKD imports, benefiting from concessional tariffs without meaningful investment in local supply chains. In many cases, parts are imported under multiple HS codes to minimize duties, effectively bypassing the spirit of localization policies.

This approach not only undermines industrial policy but also threatens the survival of local auto parts manufacturers, many of whom have supported the sector for over three decades. SMEs that once expected growth alongside industry expansion are now facing declining trend, reduced production, and limited technological advancement.

The government’s role in this scenario is equally critical. Policy inconsistency, weak enforcement, and continued incentives without accountability have contributed to the current imbalance. As a new auto policy is under consideration, it is essential to evaluate past outcomes rather than repeat past mistakes.

Key reforms must include:
• Clear definition and strict monitoring of CKD/SKD structures
• Enforcement of time-bound localization targets
• Linking incentives to actual technology transfer and local investment
• Support for domestic auto parts manufacturers
Without decisive action, Pakistan risks losing its engineering and manufacturing base, increasing pressure on foreign exchange reserves, and remaining trapped in a cycle of imports and external financial dependence.

As rightly stated in engineering principles, “If you can measure it, you can improve it.”