LAHORE:
Pakistan’s auto industry is once again under strain as the inflow of used cars continues to grow, raising alarms about the survival of local manufacturing.
In July 2025 alone, 4,423 units of used cars entered the country, translating into an estimated Rs6.5 billion loss for local vendors. Industry associations argue that every car assembled in Pakistan contains at least Rs1.5 million worth of locally produced parts, meaning each imported vehicle directly strips away demand from domestic suppliers.
Breakdown figures show that 3,996 units were brought in under the Personal Baggage scheme, 331 under the Gift scheme, and 96 through the Transfer of Residence scheme. These avenues were initially created to support overseas Pakistanis, but over time, they have become parallel channels for large-scale commercial imports.
According to the Pakistan Automotive Manufacturers Association (PAMA), sales of locally assembled vehicles fell 49% in July 2025 compared with the same month last year. Vendors and assemblers alike warn that this mismatch between rising imports and falling local sales poses an existential threat to the industry.
“The incessant import of used cars is contributing to long-term economic harm in terms of draining foreign exchange, displacing local jobs, and undermining tax revenue from domestic manufacturing,” said Shehryar Qadir, Senior Vice Chairman of Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM).
He emphasised that local auto production sustains more than 330,000 direct jobs and another 1.5 million in related sectors, ranging from steel and plastics to logistics and services. “This is not simply about assembling cars, it is about building a vendor base, establishing technological links with global automakers, and creating multiple layers of tax revenue for the government. Every serious auto-producing country, from India to Thailand, and to Vietnam, chose industrialisation over imports, and that is why their industries became engines of growth,” he said.
Over the last decade, Pakistan has imported an average of 34,000 used vehicles annually, a figure that puts second-hand imports on par with or even above the volumes of some original equipment manufacturers (OEMs) operating in the country. In the fiscal year 202425 alone, around 40,000 used cars were imported, capturing close to a quarter of the total passenger car market. PAAPAM estimates that this cost local vendors Rs60 billion in lost revenues and more than 40,000 potential jobs in one year.
Industry officials argue that the policy environment has created a structural distortion in the market. “Because total market demand is finite, every used vehicle imported represents a direct loss of sales for domestic assemblers and parts vendors. It strips away demand for locally produced tires, seats, wiring harnesses, lamps, and hundreds of other components that keep our vendor ecosystem alive,” Qadir said.
The imbalance is stark compared to regional peers, as India and Thailand, both successful auto-producing countries, have negligible levels of used car imports. Policymakers there concluded early that any short-term consumer benefit from cheaper used vehicles was outweighed by the long-term damage to industrial growth and government revenue. Pakistan, however, stands as an anomaly, tolerating a steady influx of second-hand cars despite being an auto-producing nation.
A senior executive at a Japanese automaker’s local subsidiary, requesting anonymity, underscored the risks. “The liberal import of used cars directly undermines the volumes needed to keep assembly lines viable. Investors hesitate to commit to new plants or technologies when a parallel market is allowed to flourish unchecked. If this continues, it will be difficult for the industry to justify future expansion.”
Qadir further argued that policies enabling large-scale imports through schemes like Baggage and Transfer of Residence are not neutral. “They have decimated demand for locally assembled vehicles. No serious automotive manufacturing nation tolerates large-scale used car imports.”
With Pakistan’s foreign exchange reserves under strain, industry leaders stress that every imported car represents a one-time outflow of foreign currency, whereas local manufacturing creates multipliers across the economy.
Industry stakeholders are calling on the government to revisit its approach. “This is not a marginal leak but a structural distortion, a parallel car market operating through loopholes intended for overseas Pakistanis,” Qadir said, adding, “The crisis is not accidental. It is the result of policy neglect and misplaced priorities, where consumer appeasement has been allowed to trump industrial strategy.”
