Automotive Sector Industries in Pakistan (Overview and History)

Pakistan’s automobile industry is one of the country’s fastest-growing businesses, with a 171 percent increase between 2014 and 2018. As of 2018, it generates 3% of Pakistan’s GDP and employs about 3.5 million people. Pakistan is the 35th largest automaker in the world.

It contributes roughly Rs50 billion (US$310 million) to the national budget. Pakistan’s auto market is one of the smallest yet fastest-growing in the world. In 2018, 269,792 automobiles were sold, however, that number fell to 186,716 in 2019 due to austerity measures.

Honda, Toyota, and Suzuki currently dominate the vehicle market. Pakistan, on the other hand, established the “Auto Policy 2016-21” on March 19, 2016, which provides tax benefits to new automakers looking to set up manufacturing operations in the country.

Renault, Nissan, Proton Holdings, Kia, SsangYong, Volkswagen, FAW, and Hyundai have all shown an interest in joining the Pakistani market in response.

MG To bring electric vehicles to Pakistan, JW Automobile Pakistan has signed a Memorandum of Understanding (MoU) with Morris Garages (MG) Motor UK Limited, which is owned by SAIC Motor. Mercedes Benz and NLC inked an agreement for the production of Mercedes Actros trucks in Pakistan. There are no vehicle safety regulations or model upgrade policies in Pakistan.

Suzuki continues to sell a few older models, such as the Bolan and the Ravi. Jolta Electric began producing electric motorcycles on July 8, 2021.

Pakistan’s government is expected to propose a five-year policy between 2021 and 2026 to increase the country’s automobile production capacity.

During a meeting with 50 Chinese automotive manufacturers on October 20, the Pakistani envoy to China stated that Pakistan will boost its automobile output to 6-8 million units in the next five years. Pakistan is establishing special economic zones in which Chinese enterprises can set up shop.

History

In that meeting, 10 Chinese and Nasla automotive companies got ready to invest in Pakistan.

Early years (1950–1969)

Pakistan produced its first vehicle in 1953 at the National Motors plant in Karachi. The plant was opened in conjunction with General Motors, who arranged the facilities for the production of Vauxhall cars and Bedford trucks.

Later, buses, light trucks, and cars were assembled at the same plant. In the same year, Ford trucks partnered with Ali Automobiles, where they introduced the Ford Anglia, Ford pickups, and the Ford Kombi. 

Exide Pakistan also began the production of car batteries in 1953. Haroon Industries partnered with Dodge Motors in 1956.

Allwin Engineering first introduced precise vehicle parts to the Pakistani market in 1961. Lambretta teamed up with Wazir Ali Engineering to launch the Lambretta TV200 scooter in 1962, while Kandawala Industries debuted the CJ5, CJ6, and CJ7 series Jeeps.

General Tyre Pakistan commenced operations in Karachi in 1963, while Hye Sons began producing Mack trucks in 1964. In 1964, Rana Tractors began making Massey Ferguson tractors, while Raja Auto Cars introduced the renowned Vespa scooter and rickshaw. 

In 1965, Jaffer Industries and Mannoo Motors began operations.

Nationalisation (1970–1989)

Many businesses were nationalized in the 1970s. The Pakistan Automobile Corporation (PACO) was established in 1972. Many businesses were acquired or merged with others.

Ali Autos became Awami Autos, Haroon Industries became Republic Motors, Ghandara Motors became National Motors, Hye Sons became Mack Trucks, Kandawala Industries became Naya Daur Motors, Jaffer Industries became Trailer Development Corporation, and Rana Tractors became Millat Tractors.

Dawood Yamaha developed Yamaha motorbikes in 1974, while Beta Engineering began making diesel engines the same year. Sindh Engineering introduced Suzuki Motorcycles in 1976. In 1977, Saif Nadeem Kawasaki introduced Kawasaki motorcycles, while Naya Daur Motors produced Suzuki Jeeps.

Awami Motors began producing Suzuki pickup trucks in 1980, while Sindh Engineering began making Mazda trucks in 1981. Agriauto Industries began producing local auto parts in 1981, and Pak Suzuki began producing vehicles in 1982.

The Vendor Development & Technical Cell, or VDTC, was established in 1983 in conjunction with the introduction of Fiat’s Al-Ghazi Tractors. PACO, Al-Futtaim Group, Hino Motors, and TTC formed Hinopak Motors in 1986 as a joint venture.

Nissan Diesel Trucks were first produced by Ghandhara Nissan in 1987. The Pakistan Association of Auto Parts and Accessories Manufacturers was established in 1989.

Deregulation (1990–2009)

The industry was highly regulated until the early 1990s. Following deregulation, the decade witnessed a huge boom in auto production as nationalization was abandoned in favor of privatization. Japan acquired the 40% share of Pak Suzuki in 1991.

In 1993, the Indus Motors Company began production of Toyota Corollas. In 1994, the Pakistan Automotive Manufacturers Association was formed, and Honda Atlas introduced the manufacturing of the Honda Civic. In 1995, the Engineering Development Board inaugurated the PAP show.

From 2001 to 2007, small assemblers and many bike importers started assembling replicas of the Honda CD70 with Chinese collaboration and established the Association of Pakistan Motorcycle Assemblers (APMA) and Mr. Muhammad Sabir Shaikh, who started Chinese-based replicas, was the first Chairman of the APMA in 2002.

After 2003, the annual production of motorcycles increased at record rates, reaching a peak of 195,688 sales in 2007. And in 2015, production grew to 2.5 million units annually. During this period, Afzal Motors began the local assembly of Daewoo buses and trucks under license from Daewoo Bus, South Korea, and Tata Daewoo.

Thanks to rising car financing of up to 70–80% by banks and low-interest rates coupled with rising rural purchases, From 2007 to 2009, the auto sector witnessed reduced sales amid high-interest rates and yen appreciation against the rupee. In 2007, the automotive industry made up 2.8% of Pakistan’s GDP and contributed 16% to the manufacturing sector.

The 2000s also saw the introduction of dual-fuel options to run both on petrol and CNG, which is more affordable and cheaper than petrol in the country.

Rapid growth (2010–present)

In 2010, auto sales rebounded and began increasing again. The auto industry predicted a growing demand in Pakistan and invested over Rs 20 billion (the US $120 million) during this decade. Motorcycle production hit a record level in 2016–17, with 2.5 million units made.

In 2015, the Auto Policy 2016–21 was introduced to help lure new automakers into a market that has traditionally been dominated by Honda, Toyota, and Suzuki. The auto industry remains the second-largest payer of indirect taxes after the petroleum industry in Pakistan.

At present, there are 10 cars for every 1,000 people in Pakistan. This is one of the lowest ratios among emerging economies, which itself speaks of the high potential for growth. Rising per capita income with changing demographic distribution and an anticipated influx of 30 to 40 million young people into the economically active workforce in the next decade will provide a stimulus to the industry to expand and grow, alongside the drastic increase in the middle class.

Toyota started the local assembly of its sedan, the Corolla. Similarly, United Motors started the first locally made car. Ghandhara Nissan started the production of the Isuzu d-max in Pakistan.

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