Pakistan Launches Plan to Broaden Domestic Auto Industry

Pakistan is implementing a five-year plan to lure more carmakers to the country with tax breaks and lower import duties, The Nikkei reports.

The country’s Automotive Development Policy through 2020 also introduces a recall system and tightens safety standards and fuel economy requirements for existing assemblers.

Analysts say the policy was designed primarily to entice European carmakers to make Pakistan an export hub. Volkswagen Group and Fiat Chrysler Automobiles have indicated interest.

Pakistan’s auto industry is dominated by domestic partners of Honda, Suzuki and Toyota. They have launched a legal challenge to the new plan, which threatens to dilute their control of the market.

The policy waives import duties on machinery used by newcomers to build new assembly plants. Newcomers also will pay a 10% import duty, one-third the rate levied against exiting local assemblers.

Established carmakers complain about the costs of updating the content of their vehicles. They also argue that they should receive the same incentives as newcomers if they make comparable investments in the country. The Nikkei says Suzuki, which controls about half the Pakistani car market, has offered to invest $460 million if the government revises the rules.