Pakistan car sales surge 43% despite policy uncertainty

Passenger car sales in Pakistan increased by 43% year-on-year during the first quarter of fiscal year 2026-27, signalling a recovery in consumer demand. However, uncertainty surrounding the country’s auto policy and sales tax regime continues to affect investment decisions and market confidence.

Data released by the Pakistan Automotive Manufacturers Association (PAMA) showed that passenger car production rose by 32% during July-September. The recovery was supported by easing inflation and improvements in the broader economic environment.

PAMA Director General Raziur Rahman said the quarterly figures reflected renewed customer interest in vehicles produced by member companies. Most segments recorded growth, although light commercial vehicles, jeeps and pickups continued to face challenges.

Truck and bus production increased by 54% during the quarter, while sales grew by 46%, reflecting stronger domestic demand. Sales of farm tractors rose by 38%, despite a 15% decline in production. Meanwhile, production and sales of two- and three-wheelers both increased by 28%.

The association, however, warned that the recovery remained vulnerable because of uncertainty over the government’s future taxation and tariff policies. It said manufacturers and other market participants were hesitant to make long-term decisions without clear policy direction.

Industry representatives have drawn some confidence from an October 7 Senate committee meeting, where the prime minister’s adviser on industries and production, Haroon Akhtar Khan, reportedly said the auto policy would be approved within two weeks.

PAMA said it expected a fair taxation framework within that period. It warned that a tariff structure unattractive to long-term investors could discourage domestic manufacturing and weaken the industry’s contribution to the economy.

Monthly figures for September presented a mixed picture. Passenger car production increased by 28% compared with August, but sales declined by 20%. PAMA linked the fall in sales to continuing uncertainty over the sales tax treatment of vehicles, particularly hybrid and plug-in hybrid models.

Truck and bus production rose by 2% month-on-month, while sales increased by 7%. Tractor production and sales climbed by 72% and 73%, respectively, following the announcement of the Punjab Green Tractor Scheme. Production of two- and three-wheelers rose by 16%, while sales grew by 14%.

PAMA also raised concerns about increasing vehicle imports during the period of policy uncertainty. The association said imports of completely built-up vehicles appeared to have accelerated ahead of the expected policy changes. Used car imports also increased, with 2,276 units arriving in September alone.

According to the association, the growing volume of imported vehicles could put additional pressure on Pakistan’s balance of payments and affect domestic manufacturers and the local auto parts industry. It warned that the trend could eventually prompt corrective measures by the State Bank of Pakistan.

The association also welcomed the position taken by Tariff Policy Board member Dr Rubina Ather against additional customs duties on tyres and certain motorcycle parts, highlighting the importance of maintaining reasonable input costs for local manufacturers.

Company-level data showed that carmakers experienced varying results in September. Indus Motor Company was the only major assembler to record year-on-year growth, with sales rising 31% to 4,142 units. Sales of its Corolla, Yaris and Cross models increased by 34% to 3,563 units, while Fortuner and IMV sales grew 16% to 579 units.

Honda Atlas Cars recorded sales of 2,128 units, down 8% year-on-year and 19% from August. Pak Suzuki Motor Company sold 4,862 units, marking a 46% annual decline and a 36% monthly drop. Alto sales fell 29% to 3,354 units, while Cultus sales plunged 68% to 138 units.

Hyundai Nishat Motors sold 884 vehicles during September. Although sales were down 25% compared with the same month last year, they increased by 19% from August.

Topline Research analyst Sania Irfan attributed the monthly weakness among several assemblers to delays in clarifying sales tax rules for hybrid and plug-in hybrid vehicles. She said the uncertainty had restricted vehicle invoicing by manufacturers.

Other vehicle categories recorded stronger performance. Sales of two- and three-wheelers reached a record 202,502 units in September, up 27% year-on-year. Tractor sales rose to 1,815 units, more than twice the level recorded a year earlier, while truck and bus sales increased by 13% to 933 units.

Despite the recent monthly slowdown in passenger car sales, market analysts expect the sector to maintain positive momentum during FY27. Growth could be supported by new vehicle variants, the entry of additional brands and improving consumer demand.

However, industry participants say clear and predictable auto policy and taxation measures will be essential to sustain the recovery, attract investment and strengthen domestic manufacturing.