Pakistan’s auto parts manufacturers are sounding the alarm over a new set of IMF-backed economic reforms that could cripple their industry. At the heart of the controversy: plans to slash import duties and open the floodgates for used car imports — measures that local manufacturers say threaten their survival.
Reforms Spark Industry Backlash
The government of Prime Minister Shehbaz Sharif is preparing to implement wide-ranging trade liberalization policies by the end of August, including reducing import tariffs to a flat 15% and allowing unrestricted imports of used vehicles. These changes are part of Pakistan’s commitments under a $7 billion IMF loan program aimed at reviving its sluggish economy, which is targeted to grow 4.2% this fiscal year.
But industry leaders say the cost of meeting those targets may be too high.
“These policies don’t take into account Pakistan’s industrial landscape. If they go through as planned, over 1,200 local auto part manufacturers could be forced to shut down,” said Aamir Allawala, former chairman of the Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM).
Manufacturers Struggling Amid Low Demand
Allawala, who also heads Techno Auto Glass Ltd., warned that the situation is already dire. His Rs4.3 billion plant at Port Qasim is running at just 20% capacity, producing about 10,000 auto glasses a month — far below its potential.
“This isn’t just a slowdown; it’s an existential threat,” he said.
A broader look at the sector paints a similarly bleak picture. At facilities like Aisha Steel Mills, Agriauto Stamping, and Thal Boshuku Pakistan — a joint venture with Toyota — production is far below capacity due to weak domestic demand. Thal Boshuku, for example, is currently producing just a third of its 54,000-car annual capacity.
Faheem Kapadia, CEO of Agriauto Stamping, said they could cater to 300,000 vehicles a year, but demand has shrunk to less than half of that.
Plummeting Car Sales Compound the Pain
The downturn in the automotive sector didn’t start with the IMF reforms. Over the past three years, car sales in Pakistan have dropped by more than 50%, falling to just over 111,000 units, according to data from the Pakistan Automotive Manufacturers Association (PAMA). High inflation, rising taxes, and political instability have all played a role.
“Car buyers are being hit with taxes as high as 45% on new vehicles. Combine that with economic uncertainty and it’s no surprise people are holding back,” Allawala said.
The result? A domino effect hitting suppliers, vendors, and workers across the industry. PAAPAM estimates that it directly employs around 500,000 skilled workers, while the broader auto sector supports as many as 2.5 million jobs.
IMF Push for Trade Openness Faces Local Realities
In its May report, the IMF called for a substantial streamlining of Pakistan’s tariff regime, particularly in the heavily protected automotive sector. It urged Islamabad to reduce import duties and dismantle preferential policies for local manufacturers — recommendations now taking shape in the National Tariff Policy for 2025–2030.
But local producers argue that the policy ignores how other countries protect their auto industries. Allawala pointed out that India maintains a 125% tariff on imported vehicles, while Thailand imposes 80%, Indonesia 60%, and Vietnam 52%. “No car-producing country allows unrestricted used car imports. Why should Pakistan?” he asked.
The government, however, appears committed to moving forward. In May, Sharif approved a phased reduction in tariffs, bringing most duties under the 15% ceiling. Industry players, including PAAPAM, have appealed for reconsideration, writing to the Ministry of Commerce to dispatch a fact-finding mission to assess the potential fallout. So far, there’s been no official response.
Jobs, Investment at Risk
For an industry that has seen billions invested over decades, the stakes are high. “This isn’t just about protecting companies — it’s about safeguarding livelihoods,” Allawala emphasized.
The auto parts sector is asking the government to strike a balance between global trade commitments and domestic industrial realities. As the countdown to policy implementation begins, manufacturers warn that the cost of reform — if poorly calibrated — could be long-term damage to Pakistan’s industrial backbone.