KARACHI – Pakistan’s automotive industry has witnessed rise in localization rate for cars and light commercial vehicles (LCVs) to 55 per cent by 2024.
Gradual increase in localization in the industry, which is contributing 2.8pc to the nation’s GDP, has increased reliance on imports.
This emerged in a meeting of Ali Asghar Jamali, Chief Executive Officer, Indus Motor Company, with Abdul Waheed Khan, Director General (DG), Pakistan Automotive Manufacturers Association (PAMA).
Abdul Waheed stated that since localization initiatives began in the 1990s in Pakistan, this shift has not only injected around $5 billion into the economy and has also created approximately 2.5 million jobs.
Despite these achievements, challenges remain, particularly in the absence of primary industries like steel and chemicals. With the right policies and investments, he said localization can propel Pakistan towards becoming a major automotive hub in the region.
Ali Asghar Jamali said that the establishment of over 300 local vendors has led to continued investments by Original Equipment Manufacturers (OEMs) and vendors in Pakistan, fostering the growth of allied industries such as lean manufacturing and just-in-time logistics. These advancements have not only enhanced production efficiency but also contributed to a skilled workforce that is now sought after in international markets, particularly the Middle East, leading to increased remittances.
He said that the introduction of the first auto policy in 2007 provided incentives for domestic production, encouraging supply chain development and technology transfers. As a result, the industry has progressively increased the local production of parts, with significant improvements in manufacturing capabilities.
He said that the success of localization can be witnessed in vehicle’s pricing. In 1993, most popular sedan with 20pc localization cost $20,185 to customers, while in 2024, with localization reaching 64pc, the price had been reduced to $15,996 (excluding foreign exchange fluctuations). This demonstrates how local production can effectively control costs and benefit consumers.
Despite these advancements, several challenges hinder the complete localization of Pakistan’s automotive industry. DG PAMA said that one of the biggest obstacles is the lack of raw material production within the country. Essential materials such as steel, plastic, rubber, aluminum, and glass components must be imported, increasing production costs and dependency on foreign suppliers.
He also mentioned that another major challenge is the high customs duty on Completely Knocked Down (CKD) units. In Pakistan, duties range from 32pc to 46pc for existing players, whereas in India, a market with over four million vehicles, the duty is flat 15pc. This disparity makes it difficult for Pakistani manufacturers to compete in both domestic and international markets.
