The government is reportedly pushing the local auto industry to the wall with the introduction of new regulations, coupled with a gradual reduction in import duties and the allowance of commercial imports of used cars up to five years old.
At a recent meeting held in Islamabad, the adoption of additional UN regulations under the 1958 Agreement for the auto industry was discussed. A total of 86 additional UN Regulations (UNRs) were presented to industry representatives, with PAAPAM (Pakistan Association of Automotive Parts & Accessories Manufacturers) and PAMA (Pakistan Automotive Manufacturers Association) being urged to adopt them as standard.
The meeting was chaired by KB Ali, who currently holds the look-after charge of CEO, Engineering Development Board (EDB), and was also attended by Asif Saeed Khan Lughmani, Additional Secretary, Ministry of Industries and Production (MoI&P).
“There appears to be a lot of misconceptions about the UN regulations at the government’s supervisory level. It seems that these regulations are being considered a one-stop solution to manage used vehicle imports, improve quality, and increase automobile exports from Pakistan,” said one of the participants.
The auto sector is reportedly struggling to understand the policy direction and its actual objectives. Documents circulating from the EDB suggest that policymakers are aiming to match— or even exceed— the standards adopted by the world’s most advanced auto industries.
By comparison: Japan, a highly industrialized nation, has adopted around 60 UNRs. Malaysia, with annual production of 800,000 vehicles, had adopted 19 UNRs as of 2012. Thailand, producing approximately 1.8 million vehicles annually, has adopted around 19 UNRs, aligned with ASEAN MRA and national standards. In contrast, Pakistan, which produces just 200,000 vehicles per year, is aiming to adopt 103 UNRs.
In a dramatic U-turn, the EDB has reportedly backtracked on the consensus reached with the industry during a meeting held on July 31, 2025. The consensus document was later rejected at a level above the EDB. A representative from the auto industry, who has been involved in the negotiations from the beginning, stated that government officials appear to be pursuing an undisclosed agenda and are blaming the International Monetary Fund (IMF) for the confusion being created.
According to this representative, “The aim seems to be to increase the cost of production in Pakistan to such a level that trading becomes more attractive than manufacturing. As a result, high-end technical jobs could move out, and Pakistan risks becoming just a trading economy.”
A senior member of the industry, visibly agitated by the policy direction, stated: “the industry is already struggling, operating at less than 50 percent of its installed capacity. Around 25 percent of the market has already been cannibalized by used car imports, and now we are facing the threat of a ‘free-for-all’ commercial import policy for used vehicles.”
He added that Pakistan’s per capita vehicle ownership is among the lowest compared to similar economies.
“The formal and organised sector is burdened with the highest taxation and production costs. To make matters worse, the government is bent on making local car manufacturing even more expensive by imposing additional taxes and levies. For instance, around 60 percent of a car’s on-road cost consists of government taxes,” said a one of prominent vendors.
“Most recent addition is NEV levy, 1 percent on ICE engine of up to 1300cc, 1300 to 1800cc 2 percent and more than 1800cc 3 percent. GST has been increased to 18 percent from 12.5 percent for cars up to 850cc.”
The questions being asked are that in an economy where almost half of the population is living below the poverty level, per capita income lowest among its peers, and with very limited financing options, who will buy cars that are made more expensive through additional costs?
A leading part maker who was part of the meeting shared that the message they are getting from these meetings is that auto industry is no more needed in the country. “We need to find some other line of business. With the cost of business already prohibitive, these new policy initiatives will end up pushing the cost of vehicles for the common man to a level that it will be impossible for a local buyer to purchase Pakistan made cars. Very clearly Pakistan is on its way to close down one of its most vibrant industries and with it more than 2.5 million jobs will cease to exist,” said a leading auto manufacturer.
