Automakers seek PM’s intervention as new tariffs make vehicle imports cheaper than local assembly

The Pakistan Automotive Manufacturers Association (PAMA) has urged Prime Minister Shehbaz Sharif to intervene over a tariff anomaly introduced through the Finance Act 2026, warning that the revised structure has made imports of fully assembled vehicles and commercial parts cheaper than domestic manufacturing.

In a letter to the prime minister, PAMA Director General Abdul Waheed Khan said the auto industry was facing a worsening crisis that posed risks to industrial stability, employment, investment and the wider economy.

PAMA represents 16 assemblers producing more than 100 vehicle models under 31 international brands. The association said the sector has sustained average annual production of around 250,000 units despite a compressed market and repeated administrative measures in recent years.

The letter said cumulative investment under successive automotive policies has exceeded $5 billion, while the industry and its supply chain support the livelihoods of nearly 2.5 million Pakistani families.

According to PAMA, the Finance Act 2026 has placed imported completely built units (CBUs) and commercially imported parts at lower duty rates than completely knocked down (CKD) kits used by local assembly plants.

The industry said CBUs in the small-vehicle segment, including vehicles below 850cc, now attract a lower customs duty, while commercially imported parts face 25% duty. By comparison, CKD kits used by local manufacturers carry 32% duty, including 30% customs duty and 2% additional duty.

Industry officials also said localised parts face duties of up to 46%, creating a structure that discourages localisation, domestic value addition and technology transfer.

PAMA said the reduction in CBU duty for vehicles below 850cc has eroded the viability of local manufacturing in that segment and could reverse decades of progress in developing the domestic vendor base.

The association warned that the anomaly could make local manufacturing of parts and vehicles commercially unviable, disrupt vendors, discourage investment and place millions of livelihoods at risk.

The letter also noted that the future Auto Industry Policy remains undecided, leaving manufacturers without clarity on the tariff and regulatory framework under which they will operate.

According to industry representatives, the uncertainty has affected business planning across the sector, including pricing decisions, production schedules, localisation plans and new investment commitments.

PAMA requested the prime minister’s immediate intervention to resolve differences between the commerce, revenue and industry wings of the government.

The association said an early correction of import tariff anomalies was needed to restore industrial operations, protect investor confidence and safeguard Pakistan’s manufacturing base.

Separately, an auto assembler said the general sales tax on hybrid electric vehicles and plug-in hybrid electric vehicles has been increased from 8.5% to 25%.

The assembler said the tax increase would raise prices of locally produced hybrids by at least 15%, or around Rs1.5 million to Rs1.8 million per unit, weakening the fuel-savings case that supported their purchase.

PAMA said the automotive industry has contributed to investment, technology transfer, localisation, employment and national economic development, and warned that delayed action could cause lasting damage to the sector.