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India–Pakistan Trade: Perspectives from the Automobile Sector in Pakistan


The auto sector in Pakistan has been a persistent opponent of trade liberalisation in the country. This has entailed losses to consumers in terms of higher prices, low safety and quality standards, and lack of innovation in this sector. The deletion programme, which was to result in indigenization of final output, has also failed to deliver expected results. The market structure of this sector, particularly in the case of cars, is narrow with only three Japanese companies monopolising the market. Even when import of older vehicles was allowed in Pakistan, it was used Japanese vehicles that were imported the most. This has prevented competition in this sector, and many respondents in our market survey have revealed that if cheaper auto sector inputs and raw material are allowed and imports are facilitated from China and India, new entrants (both domestic and foreign) may enter production. Pakistan also has a comparative advantage in several auto sector components/classifications. However, these do not find their way, for example, to India due to what the industry describes as non-tariff barriers, state-specific levies and unconventional environmental standards required by Indian authorities. This paper proposes a way forward whereby the commerce ministries of India and Pakistan can address the concerns of Pakistan’s auto sector and create a win-win milieu. However, this alone will not be enough. We explain in this paper that several institutions in Pakistan such as the National Tariff Commission, Ministry of Industries, Engineering Development Board, Federal Board of Revenue, and PSQCA will also have to play their role in challenging domestic manufacturers and opening up the auto sector for competition, which will help consumers in Pakistan and lead to job creation.


  • Trade
  • Automobile
  • Non-tariff barriers
  • India
  • Pakistan

JEL Classification

  • F13
  • F14
  • F15
  • L11
  • L65

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  1. 1.

    Updated from Jalil (2012).

  2. 2.

    Tier 3 companies supply small auto components to tier 2 vendors for assembling. These assembled parts are then supplied to tier 1 vendors for further assembling.

  3. 3.

    The EU countries mainly included Germany and Italy.

  4. 4.

    Deletion programme focused on progressively increasing the proportion of local parts in vehicle manufacturing.

  5. 5.

    Data of Chapter 87 of the Harmonised System (HS) of classification is used via ITC. HS Classification is the standardised system of classifying traded commodities.

  6. 6.

    SRO 275 (I).

  7. 7.

    These consumer welfare gains are calculated only for products in the sensitive list.

  8. 8.

    Mercosur is a trade bloc-based on a treaty signed by Argentina, Brazil, Paraguay, Uruguay and Venezuela to promote free trade. This was first signed by Argentina and Brazil. Under this treaty, automobile trade was quota based. For example, it was agreed that Brazil would export US$265 worth of duty free automobile products to Argentina for every US$100 of duty-free Argentine exports to Brazil. Each country negotiates annual bilateral import quotas for tariff free entry of automobiles. Economic conditions and the state of the auto industry in Argentina and Brazil resembled the current scenario of India and Pakistan and it proved to be a win-win situation for both countries (Ahmed 2013d).

  9. 9.

    Certification required to confirm that a product meets a specific standard.



Auto Industry Development Programme


Auto Component Manufacturers Association (India)


Afghan Transit Trade


Bilateral Revealed Comparative Advantage


Completely Built Up


Competition Commission of Pakistan


Cost, Insurance and Freight


Completely Knocked Down


Convergent Parallel Design


Countervailing Duties


Engineering Development Board


Federation of Pakistan Chambers of Commerce and Industry


Free Trade Agreement


Institute of Public Policy


Indian Rupee


International Trade Centre


Japan International Co-operation Agency


Light Commercial Vehicle


Most Favoured Nation


Mixed Method Research


Multinational Corporation


Non-tariff Barrier


Original Equipment Manufacturer


Pakistan Association of Automotive Parts Accessories Manufacturers


Pakistan Automobile Corporation


Pakistan Automotive Manufacturers Association


Pakistani Rupee


Pakistan Standards and Quality Control Authority


Preferential Trade Agreement


South Asian Free Trade Agreement


Withholding tax


Trade Complementarity Index


Trade Development Authority of Pakistan


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This paper has been written as part of research studies conducted under the project “Strengthening Research and Promoting Multi-level Dialogue for Trade Normalisation between India and Pakistan” led by Dr. Nisha Taneja. The authors are thankful to Dr. Nisha Taneja, Dr. Mihir Pandey, Dr. Meenu Tiwari, Dr. Sanjay Kathuria and Dr. Saikat Sinha Roy for comments.

Disclaimer Opinions and recommendations in the paper are exclusively of the author(s) and not of any other individual or institution including ICRIER.

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Correspondence to Vaqar Ahmed .

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Annexure: Calculation of Landed Cost of Indian Cars

Annexure: Calculation of Landed Cost of Indian Cars

Car model and price in Pakistan Car model and price in India Calculation of landed cost of selected Indian cars
Model Ex-factory price (PKR) Engine size Model Ex-factory price (Indian rupee) Engine size Price in PKR exchange rate (1 INR = 1.63 PKR) Freight cost $400 exchange rate: 1$ = 98.10 Insurance 1 % (CIF = Freight + insurance) (PKR) Tariff rate (%) Tariff rate ∗ CIF WHT (5 %) Landed price of Indian Car PKR (tariff rate ∗ CIF + WHT)
Suzuki Mehran VX 625,000 796 cc Tata Nano Std BSIII 152,617 624 cc 248,766 39,240 2880 290,886 30 87,266 12,438 348,470
Suzuki Cultus VXR-Euro II 1,044,000 993 cc Hyundai Santro Xing (Non AC) 305,543 1086 cc 498,035 39,240 5373 542,648 50 271,324 24,902 794,261
Suzuki Swift RS DX 1.3L 1,221,000 1328 cc Tata Indigo eCS LS 540,994 1396 cc 881,820 39,240 9211 930,271 55 511,649 44,091 1,437,560
Suzuki Liana RXI (Petrol) 1,465,000 1328 cc
Corolla XLI standard 1,499,000 1300 cc Toyota Corolla Altis Diesel D4DJ 1,300,199 1364 cc 2,119,324 39,240 21,586 2,180,150 55 1,199,083 105,966 3,424,373
Corolla GLI 1,729,000 1600 cc Toyota Etios J 555,040 1496 cc 904,715 39,240 9440 953,395 55 524,367 45,236 1,474,318
CRZ-hybrid 3,269,000 1496 cc
Honda City Manual Transmission 1,548,000 1300 cc Honda City i DTec E 853,000 1498 cc 1,390,390 39,240 14,296 1,443,926 55 794,159 69,520 2,254,069
Honda Civic i-VTEC Manual 2,051,000 1800 cc Honda CR V 2.0L 2WD MT 2,089,057 1997 cc 3,405,163 39,240 34,444 3,478,847 75 2,609,135 170,258 6,184,556
Camry A/T Up-Spec 10,949,000 2494 cc Toyota Camry 2.5 G 2,526,540 2494 cc 4,118,260 39,240 41,575 4,199,075 75 3,149,306 205,913 7,473,480
Fortuner 5,742,000 2694 cc Toyota Fortuner 4 × 2 Manual 2,270,435 2982 cc 3,700,809 39,240 37,400 3,777,450 75 2,833,087 185,040 6,718,937
CR-V 2.4 Litre 7,900,000 2354 cc

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Ahmed, V., Batool, S. (2017). India–Pakistan Trade: Perspectives from the Automobile Sector in Pakistan. In: Taneja, N., Dayal, I. (eds) India-Pakistan Trade Normalisation. Springer, Singapore.

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