More than 2,000 used vehicles entered Pakistan under the overseas gift scheme in October, defying state restrictions and accelerating an influx of foreign-built automobiles into the domestic market.
The arrival volumes represent an aggressive rebound from May this year, when tighter customs oversight had temporarily squeezed monthly gift-scheme imports down to just seven units, according to former Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) chairman Aamir Allawala.
By September, shipments had expanded to 2,238 units before holding above the 2,000 mark through October. Domestic automotive parts vendors say these transactions bypass conventional banking channels, relying on payments to Japanese auction houses through informal hawala networks and cash settlement inside Pakistan.
Surging Influx of Built-Up Vehicles
Official trade data tracks the broader import trend. Inward shipments of completely built-up units, covering both new and second-hand passenger cars, jumped 40 per cent to $126 million during the first quarter of fiscal year 2026-27, compared with $90 million in the same three months of the prior fiscal year, according to the Pakistan Bureau of Statistics.
Automakers entering the market account for part of the increase. Brands are bringing fully assembled vehicles into showrooms to test consumer appetite across major urban centers before committing capital to domestic assembly lines.
The commercial friction deepened following the release of the government’s revised automotive policy in early November. Engineering groups say the framework shifts incentives toward finished imports and complete assembly kits, weakening the 1,200 local manufacturing firms that supply parts to domestic car plants.
The Breakdown of Local Content
The domestic parts footprint varies sharply across competing brands operating in Pakistan. Vehicles assembled from Japanese partners currently integrate between 50 per cent and 65 per cent locally produced components. Korean models carry 20 per cent to 25 per cent domestic content, while newly introduced Chinese vehicles operate with zero to 5 per cent local parts.
Locally assembled vehicles typically absorb between Rs1.5 million and Rs2.5 million worth of parts produced by domestic engineering shops. The Pakistan Association of Automotive Parts and Accessories Manufacturers warned that lowering trade barriers will induce vehicle assemblers to import foreign components rather than procure them from local suppliers.
The association said the domestic component manufacturing sector directly employs 300,000 workers and supports 1.5 million indirect jobs across the wider automotive value chain.
Tariff Disparity with Regional Assembly Hubs
Auto suppliers take particular issue with the proposed application of Pakistan’s National Tariff Policy to the vehicle sector. PAAPAM Chairman Abdul Rehman Aizaz pointed out that the draft auto policy sets duties on completely built-up units at 15 per cent, running counter to the protective tariff walls maintained by regional assembly hubs.
India levies tariffs of 120 per cent on completely built-up vehicles, while Thailand applies an 80 per cent duty and Indonesia charges 52 per cent to protect domestic plants and supply networks.
“All these vehicles are imported through payments to Japanese auction houses via hawala channels and unregulated domestic sales through cash transactions,”
The revised policy also establishes a 5 per cent duty on fully imported small electric vehicles alongside reduced sales tax rates. Parts makers argue that while these tax cuts may lower retail prices for vehicle buyers by 5 per cent to 7 per cent, car purchasers represent barely 0.1 per cent of the national population.
Shifting Rules from Consultation to Policy
The standoff follows an abrupt pivot in industrial policy formulation between the middle and end of the calendar year. Component manufacturers stated they took part in formal consultative sessions with the Ministry of Industries through June 2026, agreeing on a localization-focused roadmap.
That consensus dissolved when the final policy emerged in November with lower barriers for commercial imports, completely built-up electric cars, and 100 per cent completely knocked-down kits. Manufacturers say the resulting import bill will drain foreign exchange reserves at the State Bank of Pakistan while leaving revenue shortfalls at the Federal Board of Revenue.
Industry groups are now pressing the Ministry of Industries to review the import rules and address the gift scheme trade, with assembly plants monitoring whether government customs enforcement stops the flow of Japanese auction arrivals.
