There exists abundant opportunities for investment and improvement in the automotive sector of Pakistan. The sector is contributing around 2.3% to the GDP with a sales volume of automobiles of PKR 214bn and is paying PKR 63bn as taxes levied by the government. A huge vendor industry, around 2500 units including tier 1, 2 and 3, is in place. Around 500 tier 1 units are directly supplying parts to original equipment manufacturers (OEMs). Overall contribution of the auto sector in the manufacturing is 22% with potential to increase with the passage of time. Paid up capital of US$ 1.5bn with a direct workforce of 192,000 signifies the importance of the sector. More than 80 assemblers have been producing a good range of products including, passengers’ cars, light commercial vehicles, trucks, buses, tractors and 2 and 3 wheelers. Government of Pakistan has recently approved Automotive Development Policy to stimulate investment level to over US$ 4bn during the next five years triggering development of automotive industry in the country.
In spite of the macro economic factors the enterprise and sector level challenges hampering the competitiveness of automotive industry include low quality, lacking of compliance with standards, low productivity and sluggish technology adaptation. Due to these reasons the higher value-added automotive components are being imported with negative impact on the process of indigenizing the component production and substituting imports.
Since Pakistan's focus has been on import substitution therefore, the export figures pertaining to parts and accessories are meagre (only over US$ 45mn) in the world market of worth more than US$ 13 tn. In order to improve the import substitution and to penetrate in the world market specific attention needs to be given to the improvement of the existing vendor industry in terms of improved management systems by engaging the international expertise to boost the productivity levels coupled with enhanced corporate social responsibility.