Car Industry in Pakistan: Scope & Challenges

Watching luxurious and majestic cars thriving on the roads is an everyday sight. From Tuscan and Tank to Mercedes Benz and Ford, Pakistanis are blessed to steer the world’s most expensive vehicles. Statistics reveal that the Car Industry in Pakistan contributes 2.8% to the GDP and Rs. 30 billion to the national exchequer as taxes and duties. Still, 350,000 cars are required for the next five years, owing to the growing population.

Car Industry in Pakistan

Who doesn’t want to own a car? Especially in this highly competitive time when commodities are less for utility and more for social depiction. Whatever the purpose, the car industry in Pakistan has been on a rollercoaster for the last few years. One of the prevailing reasons was political instability which affected the manufacturing, production, and prices of various car models. Let’s have a glance at the car industry of Pakistan in 2023.

Toyota, Suzuki, Honda – Big 3 in 2023

The beauty of the Civic is mesmerizing, a dream car for those who like compact and elegant vehicles. Yet, its sales dropped by 72% in 2023 along with the rough terrains specialist, Fortuner, whose sales dropped from 14,357 in 2022 to 78,22 in 2023. 

Car Industry in Pakistan

According to a yearly report released by Pak Wheels, major car brands like Toyota, Suzuki, and Honda suffered a decline in sales during 2023 compared to the previous year. Pak Wheels reported that other than PSMC-listed models, the sales of Honda Atlas and Toyota Indus Motors dropped by 50%. 

ModelYear 2022Year 2023
Toyota Car Sales51,94519,320
Honda Car Sales28,92870,68
Suzuki Car Sales114,6053424

New Taxes on the Car Industry in Pakistan

New taxes on cars in budget 2024-2025 unfold thrilling slabs. Previously, a fixed tax of Rs. 10,000 was levied on vehicles up to 850cc that will now be 0.5%, a value-based tax system. A 1% tax will be levied on the vehicles ranging from 8001 to 1000cc, which was Rs. 20,000 previously.  Taking about Regulatory Duty (RD), it will be 15% on used cars above 1300cc. However, those who want to buy below 1300cc like Nissan Dayz, Toyota Passo, & Toyota Vitz, can enjoy the same fixed tax as no RD is implied on these vehicles. 

  • 0.5% tax on vehicles up to 850cc
  • 1% tax on vehicles from 851 to 1000cc
  • 2% tax on vehicles from 1001 to 2000cc
  • 3% tax on vehicles from 1601 to 1800cc
  • 5% tax on vehicles from 1801 to 2000cc
  • 1 to 7% tax on vehicles from 2001 to 2500cc
  • 9% tax on vehicles from 2501 to 3000cc

Benefits of Import Taxes For Local Manufacturing

Pakistan has immense potential for automobile production. The rising FED and customs on the car industry have compelled users to embrace local assembling and manufacturing, which has proved a substantial initiative for the growth of the car industry in Pakistan. One of the major benefits of custom duty on Completely Built Unit (CBU) hybrids will be a buying shift to local HEV manufacturers, as more custom duty will result in a price increase, and ultimately car buyers will prefer low-priced HEVs including Alto, Prius, Vitz and Cultus. 

Car Industry in Pakistan

The car industry took relief when the government decided to maintain the previously levied 8.5% tax on locally manufactured hybrid electric vehicles (HEV) which was suggested to be 25% in the Budget 2024 Pakistan. Also, the 15% regularity duty on used vehicles above 1300cc and HEVs will increase the price of Toyota Aqua, Honda Vezel, and CHR. Thus, the customers will prefer buying locally manufactured cars in Pakistan. 

Future of Automobile Industry in Pakistan

The future of the car industry in Pakistan is bright provided that the government facilitates local manufacturers, and lower taxes on local cars will lead to low prices and more sales. Also, the global car market will influence the automobile industry of Pakistan. As technological advancement dominates the world, the automobile industry also bears sustainable production. Hydrogen-fuel cars, and electric vehicles, and battery-fuel cars are the need of the future. 

Car Industry in Pakistan

The Toyota Corolla Cross – Upcoming Price Hike

Acknowledging the yearly demand of almost 350,000 units, many famous companies have opted to take advantage of automobile scope, to locally assembled and manufactured vehicles in Pakistan. One example is the Toyota Corolla Cross, a locally assembled hybrid electric vehicle (HEV), launched by Indus Motor Company in 2023. Corolla Cross price is currently valued at Rs. 7.5 to Rs. 9.5 million, however, the price is expected to rise to Rs. 3 million after the latest withdrawal of a 50% customs duty exemption on used HEVs.  

Understanding Scope of Automobile Industry in Pakistan

Analyzing the demographics of Pakistan, statistics hint towards almost 4 lac new vehicles by 2035. Out of the 8 lac young population, 40% will require cars for travel and social purposes. Data reveals almost 3.5 million people are employed in the car industry of Pakistan. Scaling local manufacturing will create more job opportunities. Therefore, experts suggest that the government should provide a 10-year comprehensive plan for the car industry of Pakistan to keep a stable trajectory of growth.  Click here to read more interesting MGC blogs. 

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