Auto illusion

AI Summary

An opinion article argues that Pakistan’s draft 2026–31 auto policy lacks a credible production and export strategy despite ambitious electrification and export targets. It criticizes tax advantages for plug-in hybrids, warning they may sustain petrol use, undermine battery-electric adoption, and weaken local parts makers while relying on uncommitted foreign automakers for export growth.

PAKISTAN’S draft auto policy 2026-31 is ambitious in its targets and directionless in its strategy. It promises electrification, export growth, greater competition, and stronger local manufacturing. However, some of its most consequential incentives threaten to undermine these very goals. The proposed policy aims to generate $6bn in exports over five years, while reducing import tariffs and promoting ‘new’ energy vehicles. These are sensible goals. But targets cannot be achieved without a credible strategy. The draft sent to the cabinet for its approval needs a fundamental rethink before it becomes policy. Consider the proposed sales tax of 9pc on plug-in hybrid electric vehicles, against 18pc under the standard rate. By granting PHEVs a substantial tax advantage, the government is effectively treating vehicles that continue to largely depend on petrol as a preferred route to electrification. This is difficult to reconcile with the stated aim of cutting the oil import bill and reducing transport emissions. A battery EV, by contrast, eliminates petrol consumption altogether. Giving PHEVs generous tax concessions without clear performance conditions risks encouraging consumers to remain tied to fossil fuels. Sadly, the government appears to have yielded to pressure from hybrid carmakers rather than applying a consistent technological framework. If electrification is the intention, incentives should favour only those vehicles that deliver the greatest reduction in petroleum consumption and emissions. The export ambition is also debatable. The policy envisages a sharp rise in vehicle and parts exports — without a production strategy. Chinese and Korean auto producers have not authorised their Pakistani partners to make or assemble their brands here for international markets. Unless the government secures commitments to use Pakistan as an export base, the targets are wishful planning. Lowering taxes on Chinese vehicles while assemblers keep relying on imported components could entrench low-value assembly. Local vendors would face mounting pressure from cheaper imported parts, and those struggling at home cannot become exporters. Tariff liberalisation is not entirely misguided. However, the government must distinguish between protection that sustains inefficiency and a time-bound framework that helps producers reach scale. Currently, the policy risks subsidising petrol-dependent technology, wiping out local autoparts makers, and promising exports the industry cannot deliver. Published in Dawn, October 23rd, 2026