LAHORE: The passage of the Motor Vehicle Industry Development Act 2025 has raised alarm bells among key stakeholders of Pakistan’s auto sector, who fear that the new legislation will not only disrupt the fragile recovery of the industry but may also criminalize legitimate business practices.
The Pakistan Automotive Manufacturers’ Association (PAMA), the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), and independent industry analysts have all voiced concerns that the Act was drafted in haste, without meaningful consultation, and risks doing more harm than good. They argue that at a time when the industry is struggling to recover from years of declining sales, the government should be focusing on policies that support growth rather than creating additional hurdles.
“This legislation appears to criminalize manufacturing and trade without sufficient justification,” said PAMA Director General Abdul Waheed Khan in a letter to the Federal Secretary of the Ministry of Industries. “Involving the FIA in such matters is especially troubling.” He added that the bill fails to enhance consumer protection beyond what is already covered under the Auto Industry Development and Export Policy (AIDEP) 2021–26, which is already in effect until 2026.
PAAPAM, representing the local auto parts industry, has also criticized the Act. A senior representative of the association said the government had not taken into account the concerns of vendors who form the backbone of the local supply chain. “The parts industry is already under immense pressure due to rising costs, volatile exchange rates, and falling demand,” he said. “Instead of providing support, this bill creates an atmosphere of fear and uncertainty. The industry needs facilitation, not penalization.”
Independent analysts have also joined the chorus of concern. One industry expert, while speaking on condition of anonymity, noted that the Act introduces strict penalties and criminal liabilities at a time when the sector is shrinking. “Globally, auto industries are provided with long-term stability and policy consistency because it is a highly investment-intensive sector,” he explained. “In Pakistan, however, every time there is a glimmer of recovery, a new policy or regulation disrupts the process. The Act is a reflection of short-term thinking, and its enforcement may scare away both local and foreign investors.”
The context for these concerns is sobering. Despite signs of recovery in the first two months of FY2025-26, the auto industry has yet to return to the performance levels of FY2021-22, which many stakeholders still view as a benchmark year. Car sales, for instance, have plummeted by 52% in just three years, from 234,180 units in FY2021-22 to 112,203 units in FY2024-25. Tractor sales dropped by 50% over the same period, sliding from 58,947 units to 29,192 units. Even the two- and three-wheeler segment, which typically remains resilient in tough times, saw a 17% decline, falling from 1,818,885 units to 1,518,752 units.
An industry veteran, while commenting on the current scenario, said the numbers highlight the gravity of the challenge. “Despite COVID, FY2021-22 was a better year for the automotive industry,” he said. “Whenever the industry starts to gain momentum, policymakers create hurdles and distortions that disrupt the pace. The Motor Vehicle Industry Development Act 2025 is the latest example.”
The government has justified the new legislation on the grounds of improving safety and quality standards for both imported and locally manufactured vehicles. Officials argue that stronger regulations are necessary to ensure consumer protection, road safety, and the competitiveness of local manufacturers in international markets. Yet industry voices maintain that these goals can be achieved through existing frameworks such as AIDEP 2021–26, rather than by introducing what they see as punitive measures.
A PAAPAM office bearer summed up the mood within the industry: “If the government truly wants to protect consumers and encourage industrial growth, it should work with us, not against us. Collaborative policymaking can deliver results, but policies made in isolation only create mistrust and resistance.”
With production volumes down, demand still subdued, and investment sentiment shaky, stakeholders are urging the government to halt the bill until wider consultations are held. They stress that any development framework for the auto sector must balance regulation with incentives, ensuring that the industry is not burdened with criminal liabilities at a time when it is struggling for survival.
For now, the debate over the Motor Vehicle Industry Development Act 2025 highlights a recurring theme in Pakistan’s industrial policy: the tension between regulatory oversight and economic growth. The auto industry, which employs thousands directly and indirectly, contributes significantly to the economy, and has the potential to become an export-oriented sector, finds itself once again caught in the crossfire of competing policy objectives.
As one analyst remarked, “The real challenge for Pakistan’s auto sector is not just competition or global economic trends. It is the inconsistency of domestic policy. Without a stable and supportive regulatory environment, no industry can flourish.”
