Pakistan Auto Policy 2026 Warning: 1.5 Million Jobs at Risk

Pakistan's auto parts makers have written to the Prime Minister asking him to reopen the draft Auto Policy 2026-31, warning that it threatens 1.5 million jobs and Rs 700 billion of local business.

Their concern is real and the policy vacuum behind it is worse than most coverage admits. But their headline number was 1.8 million in August, and that is worth understanding before you accept either figure.

What PAAPAM Told the Prime Minister

In a letter dated 23 October 2026, the Pakistan Association of Automotive Parts and Accessories Manufacturers asked Shehbaz Sharif to review the draft and to grant a meeting before it is finalised.

The association's chairman, Abdul Rehman Aizaz, objects to three things specifically: proposed tariff reductions on completely built-up vehicles — cars imported whole rather than assembled here — concessions for new-energy vehicles, and lower duties on auto parts.

Its case rests on scale: more than 1,200 member companies, 1.5 million jobs, Rs 700 billion of components supplied annually to car and motorcycle assemblers, and $1.8 billion of annual import substitution — parts made here that would otherwise be bought abroad.

The Jobs Figure Fell by 300,000 in Two Months

Here is something nobody has pointed out. In August 2026, PAAPAM's then chairman Usman Aslam Malik put the figure at 1.8 million jobs tied to local parts manufacturing.

By October, under a new chairman, the same association fighting the same policy says 1.5 million. That is 300,000 fewer jobs, a reduction of about a sixth in eight weeks, with no explanation offered.

The change of chairmanship may be the entire reason, and we are not suggesting bad faith. But it does tell you what kind of number this is.

These are PAAPAM's own estimates, not audited figures. A number that moves by a sixth in two months is a negotiating position rather than a measurement — which does not make the underlying concern wrong, only the precision false.

What 1.5 Million Jobs Actually Means

Divide the jobs by the companies and you get 1,250 employees per member firm. Pakistan's parts sector is overwhelmingly small and medium engineering workshops, and an average of 1,250 staff each is not credible.

So the figure necessarily counts direct, indirect and induced employment across the whole supply chain — raw materials, transport, services, the shops that sell to the workers. That is a legitimate way to count. It is not 1.5 million people on parts-maker payrolls, and nobody should read it that way.

The Used-Car Numbers Do Hold Together

Credit where it is due, because the association's other arithmetic reconciles. PAAPAM says roughly 50,000 used cars were imported last year, close to 30 per cent of the domestic market, and that each one displaces about Rs 1.5 million of locally made components.

Multiply those out and you get Rs 75 billion of displaced local parts. Set against the Rs 700 billion the association says it supplies annually, that is 10.7 per cent of the sector.

That is a credible order of magnitude, and it turns a vague complaint into a specific claim: used imports are taking roughly a tenth of the local parts business.

The association also puts the informal economy around those imports at about Rs 200 billion, and says parts makers supply up to 65 per cent of components by value to local assemblers.

Pakistan Has Had No Auto Policy Since June

This is the context that explains the volume of the argument, and it is almost absent from the coverage. The document being fought over is formally the Automobiles and Auto Parts Manufacturing Policy 2026-31.

It replaces the Auto Industry Development and Export Policy 2021-26, which expired in June 2026. So the country is roughly four months into a policy vacuum, with investment decisions waiting on rules that do not yet exist.

The process has been long. The draft was first put to the Prime Minister on 2 June 2026. A committee formed on 19 June under Energy Minister Awais Leghari held 14 sessions with economists, and three committees have reviewed the policy since.

Our running status update on the Auto Policy 2026-31 tracks where the draft actually is, and the IMF discussions cover the external constraint.

PAAPAM Was at the Table in May

This is the part that deserves a straight question. Back in May, the state news agency reported a consultation on the policy chaired by Haroon Akhtar Khan, the Prime Minister's Special Assistant on Industries and Production, with PAAPAM in the room alongside the assemblers' association.

Officials said then that the proposals would protect parts already made locally and parts that could be made domestically within five years, and that the core objective was to strengthen local industry.

Five months later the association is writing to the Prime Minister to say the draft does the opposite. Either the draft moved after those consultations, or the consultation did not deliver what PAAPAM understood it would. That is the question worth putting to both sides, and neither has answered it publicly.

Be Careful With “Approved” Headlines

On this policy specifically, reporting has already run ahead of the facts once. In September 2026 a senior Prime Minister's Office official stated that no final decision had been made and that a formal written draft was still being prepared — explicitly correcting reports that it had been approved.

That denial came before the October reporting of draft approval, so the two are not in conflict. The sequence runs: not approved in September, draft approved and sent to cabinet in October.

Until that last row changes, nothing in the draft is law. An in-principle approval is not a notified policy, and proposed rates are not rates you can plan around.

What Is Actually in Dispute

The measures PAAPAM is fighting are specific, and some are already in motion.

Concerns as reported from PAAPAM's representations. The government has not published point-by-point responses.

There is a counterweight PAAPAM cannot lobby away. The finalised draft goes to the IMF before cabinet, to confirm the tariff cuts fit Pakistan's fiscal targets under a 37-month, $7 billion facility running since September 2024.

And the Prime Minister has pushed the other way on ambition, asking officials to double the draft's export target from $4 billion to $8 billion a year by 2031. He also asked how many components in locally assembled cars are genuinely made in Pakistan — a pointed question, given that local content is the whole of PAAPAM's case.

Will Any of This Change Car Prices?

Possibly, eventually, and not in a way anyone can promise. Lower duties reduce one input into a price, not the price itself.

Exchange rates, production costs, local taxes and what assemblers choose to pass on all sit in between. No specific model's price reduction is guaranteed by an unnotified draft.

The parts side has its own thread, covered in our reports on the proposed car parts duty cut and EV parts duty proposals, while the EV financing limit covers the buyer-side incentives PAAPAM is objecting to.

Final Thoughts

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