PAAPAM Wants 50% CBU Duty in Pakistan's Auto Policy 2026-31

Pakistan's parts makers want import duties on finished cars pushed to 50%, with zero duty on imported raw materials, under the Auto Policy 2026-31 now being drafted in Islamabad.

The Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) laid out the numbers in a position paper submitted to the government. The full tariff ladder it proposes:

• 50% duty on completely built units (CBUs)
• 40% duty on localised auto parts
• 30% duty on completely knocked down (CKD) kits
• 5% duty on locally produced raw materials
• Zero duty on imported raw materials

The logic is simple: make finished imports expensive, make inputs cheap, and hope the value-add stays home. PAAPAM said a 40% duty on localised parts would stop assemblers sourcing components from China, South Korea and Japan instead of buying Pakistani-made alternatives.

Who is asking, and how big is the ask?

PAAPAM represents more than 300 member companies and roughly 1,200 businesses across Pakistan's automotive industry. By its count, the sector supports around 300,000 direct jobs and another 1.5 million indirect livelihoods. The industry includes 13 car assemblers, more than 50 motorcycle and electric-bike assemblers, 10 truck and bus assemblers, and three tractor manufacturers.

That's the constituency. The association also requested a meeting with Prime Minister Shehbaz Sharif before the government approves the new policy. A meeting request is not a meeting; the tariff numbers remain a proposal, not policy.

Why does PAAPAM think the industry needs protection?

Two numbers do most of the arguing. First, PAAPAM estimated domestic manufacturers face a 34% structural cost disadvantage, driven by high energy prices, financing expenses, taxes, freight charges, certification requirements and logistics inefficiencies.

Second, car sales volumes sit close to 2005 levels because of slow economic growth. Nearly two decades, no net volume growth. The market is also fragmented: 13 car assemblers offering more than 40 models, splitting a pie that stopped growing years ago.

Used-car imports and inconsistent restrictions on CKD kits add further pressure, the association said.

What about the National Tariff Policy 2025-30?

Here's the friction. The National Tariff Policy 2025-30 aims to cut import duties to a maximum of 15%. PAAPAM warned that this cap could squeeze the local auto and parts industry if sector-specific challenges go unaddressed. A 15% ceiling and a 50% CBU duty do not occupy the same room comfortably.

The association also reached back to 2006, when the government replaced the mandatory Deletion Programme with a Tariff-Based System. The industry accepted that switch on the understanding that future policies would keep encouraging local manufacturing. PAAPAM's message: that understanding is now at risk.

It pointed to evidence from the recent past. A 25% tariff failed to encourage new assemblers to localise, with several new entrants achieving only 0-10% localisation. Established manufacturers, by contrast, increased local production when duties sat around 45%.

Can Pakistan's parts industry actually export?

PAAPAM thinks so — to a point. It said the auto-parts industry could target $1 billion in annual exports with appropriate government support. For context, that would mean transforming an industry that currently serves a stagnant home market into a serious regional supplier.

Its asks on the export side:

• Low-cost financing for auto-parts and component exporters
• Cutting the export threshold to qualify as an exporter from 80% to 25%
• A gradual export growth target over five to 10 years
• Extending the export proceeds realisation period from 180 days to 365 days

On that last point, PAAPAM asked the State Bank of Pakistan to act, arguing that auto-parts research, development and international contract-completion processes require longer timelines than six months.

The association maintained that a balanced tariff policy plus targeted export incentives would let local manufacturers compete internationally while raising investment and employment.

What to watch next: whether Sharif grants the meeting, and how the government squares a 15% tariff ceiling with a proposal that starts at 30% and climbs from there.