Indus Motor Sales Surge 33% Amid Policy Uncertainty

KARACHI: Pakistan’s automotive sector continues to face policy uncertainty despite signs of recovery in vehicle sales, with the industry operating at less than half of its installed production capacity, according to key takeaways from the annual report of Indus Motor Company (INDU).

The report noted that Pakistani consumers currently have access to 31 automotive brands and more than 100 locally assembled models across major vehicle segments, reflecting growing competition in the domestic market.

Indus Motor’s total sales, including completely knocked-down (CKD) and completely built-up (CBU) units, increased 33% year-on-year to 45,035 units. Passenger car sales rose 56% year-on-year, while commercial vehicle volumes remained broadly stable.

The company said the government’s decision in January 2026 to abolish the Baggage Scheme for used-vehicle imports and introduce mandatory pre-shipment inspections under the Gift and Transfer of Residence schemes was a positive development for the local automotive manufacturing sector.

As a result, used-vehicle imports declined to around 38,000 units in fiscal year 2026 from approximately 42,000 units in FY25. However, used imports still accounted for around 19% of total sales reported by the Pakistan Automotive Manufacturers Association (PAMA).

The report highlighted that the domestic auto industry is operating at below 50% of installed capacity, indicating significant potential for a recovery in production volumes and greater localization.

However, uncertainty over the government’s automotive policy remains a key concern. The Automotive Industry Development and Export Plan (AIDP) 2021–26 expired in June 2026, while the successor policy has yet to be announced.

Indus Motor expects growth in the automotive sector to moderate in FY27 amid delays in the announcement of the new policy, which could affect production planning, investment decisions and overall sector expansion.

The company also warned that the National Tariff Policy 2025–30 could reduce the price gap between locally assembled vehicles and CBU imports. This could put pressure on the competitiveness of local manufacturers and influence future localization efforts.

Meanwhile, changes in taxation have affected vehicle prices. The increase in the General Sales Tax (GST) on Hybrid Electric Vehicles (HEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) from 8.5% to 25% resulted in price adjustments from July 2026. Tax rates on internal combustion engine (ICE) vehicles and battery electric vehicles (BEVs) remained unchanged.

Consumer financing has emerged as another important driver of vehicle demand, with financing penetration improving to 26% from 21%. Indus Motor believes further increases in financing limits and longer repayment tenures could improve vehicle affordability and provide additional support to automotive demand.