PAAPAM Urges Tax Cuts To Boost Local Manufacturing

Chairman of the Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) Abdul Rehman Aziz has stated that the government has imposed excessive taxes on the auto industry, impeding its expansion.

He expressed this during the inaugrual cemeromny of the 2023 Pakistan Auto Show (PAPS) that was held at the Expo Center in Karachi between 27th and 29th October. Aziz said:

“The government should realize that its treatment of the auto industry as a cash cow by burdening it with taxes ranging between 37 and 43% per locally produced car, is hampering the growth of the auto industry.”

Aziz revealed there are around 300 companies in Pakistan that are manufacturing thousands of components for local automakers generating sizable employment and contributing heavily to the industrial output of the country. He added that whiile majority of low-tech components and certain hi-tech components (of 4-wheelers) are made in Pakistan, it still doesn’t mean that the localization goal is near completion like in notorcycle and tractor segments due to various reasons including low volumes, certain non-tariff barriers, and reluctance in the transfer of technology by international companies etc.

Even when compared to other undeveloped countries in the region, he claimed that Pakistan has relatively low car use per capita. According to PAAPAM, OEMs should prioritize the market’s potential and collaborate with local OEMs, foreign OEMs, and Pakistani auto part producers to form tripartite joint ventures.

The automobile horizon is not just comprised of passenger cars and SUVs, according to Chairman PAAPAM. It also includes industries like motorcycles and tractors, where our value to end users is globally competitive. He stated:

“The main reason for competitiveness in these sectors is the 90 to 95% localization we achieved in these sectors, contributing heavily to the GDP and the national exchequer. Complex and critical components of motorcycles are manufactured in Pakistan under technical assistance of Japanese companies. Hi-tech components and assemblies from complete engine to suspension, all are 100% locally manufactured.

The resultant good quality and competitive pricing are getting the acknowledgement not only from local but international customers also, as motorcycles are now being exported to various countries, he added. Chairman PAAPAM also revealed that Pakistan is producing the cheapest tractors in the world, even cheaper than India and China, due to the localization of almost all engine, transmission and suspension parts.

Press Release