The Auto and Auto Parts Policy 2026-31 has turned into a mystery. Multiple drafts are circulating, yet no one outside close government circles knows the exact contents of the document, which was approved “in principle” by Prime Minister Shehbaz Sharif in early September and forwarded for “IMF review” late last month.
The country’s 1,200 auto parts manufacturing companies, which employ 300,000 people directly and 1.8 million indirectly, are in a state of panic after reading multiple leaked drafts. The latest draft begins by acknowledging the scale of the sector, noting $4 billion in foreign and domestic investment and domestic production valued at $6bn in 2026. The sector constitutes 4.5 per cent of the nation’s large-scale manufacturing, features more than 13 car assemblers, supports 1,200 auto parts manufacturers, and contributes Rs600bn in annual tax revenues.
The draft highlights three significant structural challenges. First is a distinct lack of domestic parts integration in New Energy Vehicles (NEVs) and vehicles introduced since 2016. Second is that export revenues have stagnated at just $190m. Third is a severe structural “cost of production” disadvantage relative to regional peers.
The draft celebrates a 40pc year-on-year increase in units produced. However, it fails to recognise that overall domestic demand is still lower than it was 20 years ago. For comparison, Indonesian auto demand grew by 279pc over 11 years from 318,367 units in 2003 to 1.21m units in 2014 on the back of an improved security situation after the 2002 Bali bombing, stable GDP growth, and enhanced consumer buying power.
