PRIME Minister Shehbaz Sharif’s in-principle approval of the Automotive Industry Development Policy (AIDP) 2026–31 is a welcome step towards giving Pakistan’s automobile industry a more predictable and export-oriented direction. Its emphasis on localization, domestic value addition, exports, electric vehicles, safety standards and rationalized tariffs addresses several long-standing weaknesses of the sector. Yet the real test will be implementation.
The central objective must be to move Pakistan decisively from vehicle assembly to 100 per cent local production. The projected $17.7 billion in foreign-exchange savings and $4.586 billion in exports can materialize only if the country develops a deep domestic manufacturing base. Tariff concessions should, therefore, reward genuine localization, technology transfer and value addition rather than merely higher assembly volumes. Particular attention must be given to small and medium enterprises. Pakistan has a large pool of engineering and auto-parts manufacturers that can become the backbone of localization if they receive affordable financing, modern technology, testing facilities, skills development and stable fiscal incentives. The proposed Minimum Domestic Value Addition regime is important, but targets should progressively rise until Pakistani-made components replace imported parts across the supply chain. SMEs should also be helped to meet international standards so that they can supply both domestic manufacturers and overseas markets. The policy’s export-linked incentives are equally important. Exports must become an integral part of the industry’s business model. We should aim not merely to export auto parts but eventually complete vehicles designed and manufactured locally. The strong focus on electric vehicles is rightly justified by global technological trends and environmental considerations. But EVs will have little impact if they remain beyond the reach of the middle class. Affordable and long-term financing should be made available for middle income groups for locally manufactured EVs. AIDP 2026–31 needs determined implementation. Its success should ultimately be measured not by how many vehicles Pakistan assembles, but by how much it manufactures, how many SMEs it develops, how effectively it meets domestic demand and how successfully it exports Pakistani-made vehicles to the world.
