Automobile Policy 2026-2031: Recommendations from PIDE Research

Mohammad Shaaf Najib and Usman Qadir
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Mohammad Shaaf Najib: Pakistan Institute of Development Economics, Islamabad
Usman Qadir: Pakistan Institute of Development Economics, Islamabad

No 2026:68, PIDE Policy View Point from Pakistan Institute of Development Economics

Abstract: Government focus and persistent incentives through ADP 2016-21 and AIDEP 2021-2026 have broken the Big-3 nexus and increased total number of automobile manufacturing and assembling firms to over 15 in Pakistan. Additionally, while production capacity has more than doubled in the last one decade, but automobile sales remain stagnant. Despite half a century of localization efforts, local parts and vendor industry is unable to produce high tech, high value parts and the industry remains highly dependent on CKD kits import. The local parts and vendor industry is largely disintegrated from GVC while exports of automobiles and auto parts remain negligible. The upcoming policy for the years 2026-2031 -in line with the goals of NTP 2025-2030- is expected to outline a tariff rationalization plan for the automobile industry. While reducing tariff cascading is a necessary step, it is essential that tariff decisions are backed by research and evidence rather than being decided arbitrarily. Furthermore, the focus must shift from industry protection to a more consumer centric approach. Tariff rationalization and commercial import both are essential for increasing competition to the local industry, enhance automobile market size, and improve consumer vehicle affordability.

Pages: 10 pages
Date: 2026
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