Research Analyst
Mar 02 - 08, 2009

Pakistan's auto vending industry is highly developed and modernised as it manufactures automotive parts and accessories of international standard. Over the past five years, the automotive industry of Pakistan has played a significant role in the economic growth and development of the industrial sector with extensive capacity build-up, both in vehicle assembly and spare parts production.

Automotive engineering is a driving force of large scale manufacturing, contributing US$ 3.6 billion to the national economy, and engaging over 192,000 people in direct employment. The after market for spares has also witnessed immense expansion over the same period, with imported parts playing an important role in meeting local demand. The spare parts market is given further impetus by a total vehicle population of approximately 5.4 million.

The local auto vending industry which comprises of over 800 manufacturers of all sizes and produces a variety of items including precision engineering parts, sheet metal, radiators, body parts, plastic parts, plugs, air and oil filters etc.

Motorcycles 1,057,751
Cars 164,710
Tractors 53,607
LCV's 21,354
Trucks 4,993
Buses 1,146
Various sources


The quality and the standard of parts and accessories, manufactured by Pakistani auto vendors, is monitored and approved by the international licensees and principals. No doubt, it is a matter of pride and prestige for Pakistan that the local tractor parts are exported to European and American countries because of their high quality and standard.

So far, the Government of Pakistan has undertaken two major initiatives in the form of National Trade Corridor Improvement Program (NTCIP) and Auto Industry Development Program (AIDAP) for the development of automotive industry. Engineering Development Board (EDB) is actively implementing the AIDP to increase the GDP contribution of the automotive sector to 5.6%, boost car production capacity to half a million units, attract an investment of US$ 3 billion, and reach an auto export target of US$ 650 million.

NTCIP is also aimed at to reduce the cost of trade and transport logistics and to bring the quality of services at par with international standards by building strong infrastructure of roads and highways.

PRODUCT 2007-8 VISION 2012
Cars (nos.) 164,710 500,000
2 wheelers 1.06 million 1.7 million
Investment (Billion) 98 225
Contribution to GDP (%) 2.8 5.6
Contribution to manufacturing sector (%) 16 25
Direct Employment 192,000 500,000
Gross sales turn over (Billion) 214 600
Various sources

The Automobile vending industry struggling to survive has reached its bottom line as it has retrenched 100,000 workers i.e. almost 50 per cent of its total workforce due to recession in the car industry. However, the stability in tractor production and minor revival of the motorcycle industry has saved some vendors from total collapse while many others have diversified their product lines to venture into other engineering fields.

Vendors are still depending on orders from car assemblers who are operating at total loss. Making parts for small orders placed by the original equipment manufacturers are not commercially viable. Many vendors now operate 10 to 15 days a month with 30 percent of their total workforce.

The vendors point out that the prices of tractors have remained relatively stable. The increase in the prices of some tractors is relatively small compared to the increase in the prices of cars. The revival of the motorcycle industry is mainly due to the price stability of all Chinese brands.

The industry suffered production losses a few months back when the prices of all motorcycle brands increased. However, after some time all the Chinese brands reverted to their normal prices. This has also put brakes on the prices of Japanese model that increased earlier when the Chinese brands increased their prices. There is a little doubt that the prices of locally assembled cars have increased beyond reasonable limits.

It also seems that the car assemblers in Pakistan have adopted a strategy of increasing profits on limited production instead of economies of scale. Therefore, at the end of the year all the car assemblers would show profits while all the auto-vendors are in red.

The government's auto policy was against the national interest. The new policy allows more use of imported components in the locally assembled cars and the number of local components has declined.


Industrialists have invested billions of rupees in vending units to make Pakistan self-sufficient and exporter of tractors, cars, and trucks. The local manufacturers and vendors have the capacity to assemble at least 80,000 to 100,000 tractors of the highest quality per annum. Interestingly, the recession in car industry has an upside for the auto vendors as well. Most of the vendors have now started producing components for other engineering industries. These vendors are making profit from their expertise in producing precision auto parts efficiently while some vendors now utilize more than 50 percent of their installed capacity to produce non-auto parts. The downside of this development is that when the auto industry revives in say three to four years there would be no auto part production capacity in the country, as the vendors would have shifted to other products by then.