Pakistani auto industry, currently dominated by Japanese automakers building ICE (Internal Combustion Engine) vehicles, is expected to be transformed with the arrival of Chinese new energy vehicles (NEV) manufacturers. Beyond Your Dreams (BYD), Chang'an, Great Wall Motors (GWM) and Shanghai Automotive Industry Corporation (SAIC) are planning to build plants in Pakistan. Coming on the heels of the ongoing solar revolution in the country, these new EV entrants are helping accelerate Pakistan's transition to clean energy. These auto plants also create an opportunity for Pakistan to become a significant exporter of electric vehicles to developing nations.
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| BYD EV. Source: CNBC |
BYD, operating in Pakistan through a partnership with Mega Motor Company (a subsidiary of Hubco), has started building a $150 million assembly plant in Gharo, Sindh. Its initial target is to produce 25,000 units annually, with the capacity to scale up to 50,000 units a year. It is expected to launch in the second half of 2026, with equipment installation and final commissioning currently underway. It plans to produce four models, ranging from entry-level plug-in hybrid Atto-2 to higher-end all-electric Seal and Sea-lion 7 Sedan and SUV.
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| Chinese EV Factories Overseas. Source: The Economist |
Great Wall Motors is partnering with local manufacturing giant Sazgar Engineering. It is expanding its capacity to produce up to 54,000 SUVs and New Energy Vehicles (NEVs) annually.
SAIC's factory located in Lahore is engineered for an operational capacity of roughly 25,000 to 30,000 vehicles per year. SAIC’s MG brand was an early mover, transitioning from completely built imports to local CKD assembly lines. They are actively producing and expanding locally assembled variants, particularly focusing on their plugin-in hybrid crossover lineup to gain market share.
Chinese automakers currently account for 20% of all auto sales in Pakistan while Japanese automakers Suzuki, Toyota, and Honda hold most of the remaining 80% market share. Kamran Kamal, a BYD Pakistan executive, has told Pakistani media that the new energy vehicles Chinese automakers are betting on will make up as much as 50% of passenger vehicles sold in Pakistan by 2030.
The ongoing solar revolution and new energy vehicles (NEV) boom in Pakistan will help reduce energy imports, improve energy security and mitigate the impact of climate change. Pakistan government policies should fully support this consumer-led movement toward the country's energy independence.
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- "These auto plants also create an opportunity for Pakistan to become a significant exporter of electric vehicles to developing nations."
ReplyDeleteI doubt it. Most of these cars are simply being assembled from CKD kits imported from China. Why would Chinese manufacturers depend on Pakistani assembly plants to export their cars when they can do it directly from China? Japanese, Korean and European car manufacturers have used their Indian plants for exports due to lower costs of production, high localization and the economies of scale that come with a large domestic market. Pakistan at present seemingly lacks both a large domestic market as well as a developed auto parts supply ecosystem.
Assembly from imported CKD kits without localisation of parts would generate some local jobs but will not develop the Pakistani auto industry (and CKD assembly will drain forex reserves just as CBU imports would). Maybe Pakistan's car market is at present too small for car makers to justify investments in localization. But it seems to be a chicken and egg problem for them. Pakistan's car market is too small due to high prices of new cars resulting from low levels of localization. (Apparently, even a Pak Suzuki Alto costs as much or more than a midsize SUV model in India even taking into account the currency exchange rates.) And unless companies invest in localization the prices aren't going to come down. But companies seem hesitant to do it since the market size is too small to justify the investment.
Vineeth: “Pakistan at present seemingly lacks both a large domestic market as well as a developed auto parts supply ecosystem”
ReplyDeletePakistani automakers can sell domestically all they can make with good profit margins today. There is no pressure for them to export.
What Pakistan lacks today is sufficient investment in exportable surplus capacity and policy incentives to boost auto exports.It can be changed, and most likely will be changed.
A new policy is already being proposed. We’ll just have to wait and see how effective it proves to be.
https://www.techjuice.pk/pakistan-auto-policy-sets-higher-car-export-targets/
Under the proposed policy, car manufacturers would be required to increase exports from 4% during 2026–27 to 20% by 2030–31. The export target for auto parts manufacturers would also increase from 5% to 15%.
The new policy aims to integrate Pakistan’s auto parts manufacturers into global supply chains and increase the country’s automotive exports.
To support this objective, the government has proposed a Duty and Tax Remission for Exporters (DTRE) scheme and the establishment of an Auto Parts Export Council.
The policy also includes measures aimed at encouraging local manufacturing and improving the competitiveness of Pakistan’s automobile industry in international markets.
The draft policy proposes several incentives for electric vehicles (EVs), including exemptions from federal excise duty, capital value tax, and withholding tax.
It also recommends reducing the customs duty on equipment used for EV charging stations to 1%.
The proposed financing limit for electric vehicles would be increased to Rs. 10 million, while the maximum loan repayment period would be extended from three to five years.
Electric vehicles, plug-in hybrid electric vehicles, and range-extended electric vehicles would receive equal treatment under the proposed framework.
The government has also proposed reducing customs duties on conventional vehicles by up to 80% over the next five years.
The measure is intended to help reduce vehicle prices while encouraging consumers to shift toward more fuel-efficient and environmentally friendly vehicles.
The draft policy also proposes stronger consumer protection measures. Manufacturers would be responsible for any increase in vehicle prices after a customer has completed the booking process.
Customers would also have to receive a confirmed delivery date at the time of booking.
The proposed framework sets out six key principles for vehicle manufacturers and introduces both penalties and incentives linked to performance.
Companies that fail to meet specified performance targets could face penalties, while manufacturers achieving their targets would be eligible for incentives.
The draft Auto Policy will be discussed with the International Monetary Fund (IMF) through online consultations and during the upcoming economic review before it is finalized and approved.
The government expects the policy to support exports, strengthen local auto parts manufacturing, promote electric vehicles, and improve affordability and consumer protection in Pakistan’s automobile market.