Auto Parts Industry Faces Uncertainty Amid New Energy Vehicle Policy Drafts

ISLAMABAD: The auto parts industry in Pakistan is gripped by uncertainty following the circulation of multiple drafts of the Auto and Auto Parts Policy 2026-31, which was approved in principle by Prime Minister Shehbaz Sharif in early September and is currently under review by the IMF. The lack of clarity surrounding the policy has left the nation’s 1,200 auto parts manufacturing companies, employing approximately 300,000 people directly and 1.8 million indirectly, in a state of panic.

The latest draft acknowledges the sector’s significance, highlighting $4 billion in foreign and domestic investment and a projected domestic production value of $6 billion by 2026. The auto parts sector constitutes 4.5 percent of the country’s large-scale manufacturing, supports over 13 car assemblers, and contributes Rs600 billion in annual tax revenues. However, the draft also identifies three critical challenges: insufficient domestic parts integration in New Energy Vehicles (NEVs), stagnant export revenues at just $190 million, and a high cost of production.

This uncertainty poses significant implications for the economy, as the auto parts industry is a vital contributor to employment and tax revenues. Stakeholders are concerned that without a clear policy direction, the sector may struggle to adapt to the evolving automotive landscape, particularly with the global shift towards electric vehicles.

Industry leaders are calling for immediate engagement with government officials to clarify the policy’s contents and address the highlighted challenges. Upcoming meetings are expected to focus on aligning the policy with the needs of the auto parts sector and ensuring its competitiveness in the international market.