Pakistan’s auto industry is facing what experts describe as an “existential threat” due to the unchecked import of used cars. Industry stakeholders stress that stricter regulations are urgently needed to protect local manufacturers, create jobs, and strengthen the economy.

According to Shehryar Qadir, Senior Vice Chairman of the Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM), the government should place a permanent ban on the commercial import of used vehicles. He argues that this practice undermines domestic investment in plants, technology, and human resources while giving unfair advantage to importers.

Qadir also highlighted that Pakistan has the potential to grow from an “infant industry” into a global auto exporter, much like its regional peers. However, this requires a long-term, predictable policy framework, supported by a coherent tariff structure that rewards local value addition. Without it, Pakistan risks falling back into import dependence.

Why Used Cars Are a Problem

• No safety or quality checks: Imported used cars bypass regulations that local manufacturers are required to follow. There is no mileage cap, and many vehicles come with prior accident history, weakened frames, or compromised safety standards.
• Environmental risks: Without UNECE WP.29-compliant testing labs, imported vehicles may not meet global emission and safety requirements.
• Fraud and misuse of schemes: The ‘gift and baggage’ scheme, meant for individuals, is widely misused by commercial importers. This loophole fuels illegal activity, including the buying of passports and sending funds abroad through unofficial channels raising concerns over the country’s financial credibility.

Economic Impact

Pakistan’s auto parts industry currently substitutes $1.25 billion worth of imports annually through local manufacturing. Domestic vendors have localized hundreds of critical components, gained validation from international brands, and built cost competitiveness even without large-scale economies.

If supported by the right policies, the sector can scale further, diversify products, and penetrate global value chains. Predictable tariffs, easier access to raw materials, and regionally competitive energy costs are key enablers for this growth.

The Way Forward

Qadir emphasizes the need for:

• Linking export incentives to actual performance.
• Mandating localization for EVs and hybrid vehicles.
• Ensuring after-sales service obligations for importers.
• Creating labs compliant with global vehicle safety and environmental standards.
• Achieving “tax-neutralization through volumes.”