In Pakistan, passenger car sales have increased by more than 32 percent, reaching 94,388 units in the first eleven months of the current fiscal year compared to the same timeframe the previous year. The increase occurs against a backdrop of declining interest rates, successive Eid celebrations, and heightened expectations of price increases prior to the federal budget for 2025–26. The Pakistan Automotive Manufacturers Association (PAMA) reported growth in various vehicle segments; however, the farm tractor sector saw a significant decline.
Strong Growth Across Vehicle Segments, Except Tractors
PAMA data indicates that jeep‑cum‑pickup sales increased by 66 percent, totalling 31,706 units. Sales of commercial vehicles experienced significant growth, with truck volumes increasing by nearly 96 percent to 3,776 units, and bus sales rising by 73 percent to 719 units. The two- and three-wheeler segment demonstrated significant growth, achieving sales of 1,378,131 units, reflecting a 30 percent increase. In contrast, farm tractor sales decreased by 36.8 percent, resulting in a total of 26,401 units sold.
Analysts Highlight Drivers Behind Auto Sector Recovery
Shafiq Ahmed Shaikh, an industry observer, observed that the increase—excluding the tractor segment—suggests a strengthening automotive market. He identified four primary factors contributing to this: reduced lending rates and appealing financing options; speculative purchasing prior to the federal budget; increased demand during Eidul Fitr and Eidul Azha; and enhanced law and order in conjunction with favourable government policies. Shaikh noted that the automotive sector is set for continued growth, especially with the rising competition from electric vehicles (EVs).
Motorcycles Remain Popular Among Middle-Income Buyers
Analyst Mashood Khan affirmed that all segments, with the exception of tractors, have demonstrated robust performance. He elaborated that motorcycles have experienced consistent demand from middle-income consumers who consider four-wheel vehicles to be financially prohibitive. The automotive industry is currently experiencing growth.
EV and HEV Tax Policy Raises Industry Concerns
Concerns remain about the tax treatment of electric vehicles (EVs) and hybrid electric vehicles (HEVs) in light of the recent federal budget release. Syed Asif Ahmed, General Manager of Marketing at MG Motors Pakistan, emphasised a persistent inconsistency: HEVs incur an 8.5 percent GST, whereas EVs are taxed at 18 percent. Social media has suggested a potential increase in GST for HEVs to 18 percent; however, the official Finance Bill does not address this matter. This is noteworthy given the commitments outlined in the Automotive Industry Development and Export Plan (AIDEP) to uphold tariffs until June 2026.
Industry Calls for Equitable Taxation to Support Green Transition
Ahmed cautioned that an increase in HEV GST could undermine recent investments made by automakers. He advocated for the government to equalise taxation by lowering the GST on electric vehicles to 8.5 percent, aligning it with that of hybrid vehicles, to promote fairness and facilitate the transition to greener transportation.
Outlook: Growth Continues, but Policy Clarity Needed
The report concludes that Pakistan’s auto industry is experiencing a robust recovery, evidenced by increasing sales in most segments. However, challenges persist in reconciling tax policy with the changing landscape of electric and hybrid vehicles.
