In the April 2025 Automark edition, we explored the foundational framework of our Automotive localization efforts, emphasizing the need for a well-defined strategy, policy alignment, and active industry participation. While those fundamentals are critical to initiate progress, this follow-up delves deeper into the systemic gaps that hinder sustainable localization. From material sourcing to digital manufacturing, and from testing infrastructure to EV preparedness, the true challenge lies not just in local assembly but in building a resilient and future-proof ecosystem. While the initial emphasis on policy and participation provides the necessary impetus, the true challenge lies not merely in the act of local assembly, but in cultivating a deeply integrated and self-sustaining industry. This requires a critical examination and strategic remediation of weaknesses across the entire value chain, from the very raw materials that enter the manufacturing process to the advanced digital technologies shaping modern production.
The Bigger Picture: Why Localization Matters More Than Ever. Localization for our auto industry isn’t merely putting cars together, it is about developing an independent industrial base that can sustain anything from raw material treatment to high-technology component manufacturing. For us, it translates into cutting back on import dependence, generating jobs, stabilizing car prices, and saving foreign exchange reserves, but genuine localization can’t be done in a vacuum. It needs to be an all-country effort across various industries, stable government policies, access to advanced technology, and most importantly, a well-organized, scalable supply chain.
The Key Barriers to Achieving Full Localization: Despite the obvious advantages, we encounter major obstacles to complete localization. Some of the main challenges include:
1. Low Production Volumes: Mass production is needed for a successful localization process. Without economies of scale, producers cannot make local sourcing profitable. Local suppliers might not be interested in producing components unless there is a guaranteed, high-volume demand. As such, producers are compelled to use costly imports, maintaining costs high.
2. Technology and Expertise Deficit An increasingly changing world automotive industry has introduced new technologies such as electric vehicles (EVs), hybrid cars, and autonomous driving technologies to the scene. Yet, our industry is not developed enough to manufacture high-tech components such as lithium-ion batteries, power electronics, or advanced safety systems. Domestic firms do not have the proper infrastructure and know-how to ensure the standards necessary for such high-tech components.
3. Lack of National Testing and Certification Infrastructure. For local components to be acceptable to the market, they have to be stringently tested and certified. We do not have full-fledged National Automotive Testing and Certification Centers (NATCCs), which compels the producers to get international certification for locally manufactured components. Not only is this costly, but it also slows down the process of localization. In the absence of in-house testing facilities, we are still at a disadvantage.
4. Frequent Policy Changes frequent changes in government responsibilities, taxes, and tariffs discourage long-term planning in our auto industry. The uncertainty and lack of clarity in auto policies discourage manufacturers from investing in localization efforts. A more stable and investor-friendly policy environment is important to ensure steady growth in local manufacturing.
5. The Bottleneck of Material Sourcing. One of the most significant systemic gaps hindering deep localization is the fragile and often underdeveloped local material sourcing infrastructure. While assembly operations may bring some immediate local economic activity, true value addition and cost competitiveness are contingent on the ability to source high-quality raw materials and components domestically. This necessitates. Pakistan needs strategic investment in foundational industries like steel, plastics, and rubber production, ensuring they meet the stringent quality and volume requirements of the automotive sector. Encouraging and supporting the growth of local component manufacturers capable of meeting OEM standards is crucial. This requires technology transfer, access to financing, and mentorship programs.
Regional Success Stories:
Learning from Vietnam and Thailand: We are not the first developing nation to face these hurdles. Other Asian economies have made remarkable progress by addressing similar issues strategically. Thailand: Southeast Asia’s Automotive Powerhouse Thailand’s success story is the result of long-term planning and deliberate policy direction. Key initiatives taken by the Government and industry to strengthen.
• Local Supplier Development Programs: The government worked with foreign OEMs to train and develop local Tier-2 and Tier-3 suppliers.
• Stable Auto Policy (BOI): Incentives through Thailand’s Board of Investment (BOI) attracted big players like Toyota, Honda, and Mitsubishi.
• Testing and R&D Infrastructure: Thailand established well-equipped testing centers, enabling local components to meet global standards.
• Eco-car Program: This initiative not only promoted fuel-efficient vehicles but also ensured that local suppliers became part of global supply chains.
Vietnam: Rapid Transition to Electric Vehicle Localization Vietnam’s strategy, particularly through VinFast, has rapidly moved from CKD assembly to full-scale EV manufacturing.
• Technology Transfer Agreements: VinFast partnered with international firms to absorb technology and kick-start local production.
• State Support for Localization: Incentives and tax exemptions were given to companies localizing EV batteries, motors, and software. • EV Ecosystem Investment: Parallel investment was made in charging stations, local battery plants, and even AI-based EV architecture.
The core takeaway for Pakistan’s automotive localization efforts is clear: true and lasting success transcends simply attracting foreign players to set up assembly plants. While foreign direct investment (FDI) is a crucial catalyst, it must be strategically leveraged to foster genuine indigenous capabilities. The path to a resilient and thriving local automotive ecosystem lies in actively pursuing joint development programs, rigorously ensuring technology sharing, and fundamentally empowering our local vendors. Pakistan’s automotive localization strategy must evolve beyond simply attracting foreign assembly.
True success lies in a proactive and strategic approach that prioritizes joint development programs to build indigenous R&D, ensures genuine technology sharing to upskill the workforce and industry, and fundamentally empowers local vendors to become capable and competitive suppliers. This holistic approach will pave the way for a resilient, innovative, and truly localized automotive ecosystem that benefits the national economy and empowers local talent.
How We Can Accelerate Localization: To replicate this success, we need to take a multi-dimensional approach to breach these barriers and unleash the potential of our auto industry. Localization is not a Band-Aid solution; it’s a long-term game that needs to involve the full engagement of all the stakeholders: government, producers, suppliers, and consumers.
We can become a leader in the automotive sector, but only if we work on filling up the structural deficiencies and investing in our local competencies. The future is challenging, but with sound policies, collaboration, and investment, we can create a successful, localized auto industry. Picture a world where most of our cars are made locally, which makes them more accessible to consumers and makes us more competitive in the global auto industry.
The journey to this vision starts today, with our shared commitment to localization.
• Creating a Structured Supply Chain Localization initiative cannot be accomplished without a structured and strong supply chain. All levels of the supply chain, from raw materials sourcing to finished parts, must be aligned and prepared to serve local production. Suppliers’ active involvement at all levels will be essential to guarantee the timely delivery of quality parts at competitive prices.
• Collaboration with Foreign Automakers: Collaboration with international automakers would help speed up the localization process immensely. Such collaborations should be aimed at technology transfer, component development, and prototyping. With the use of the experience of renowned global players, we can improve our manufacturing ability in no time and conform to international standards.
• Material Localization: Focus on material localization is a critical aspect that is usually neglected. To minimize costs, local steel, aluminum, and plastic component production will be vital. But without upstream industries specializing in these materials, component localization will never be achieved. Setting up facilities for the manufacturing of high-quality materials such as steel and aluminum will make local component production sustainable and affordable.
Capacity Building for EV Components: While this article focuses on conventional vehicles, it’s key to consider the future of electric vehicles (EVs). We need to start localizing EV components such as batteries, power electronics, and charging technology. With growing demand for EVs across the globe, there will be a greater demand for local EV components. This is a strategic chance to establish Pakistan as a regional center for EV component manufacturing.
• Adoption of AI and Digital Manufacturing: In order to stay competitive in the global auto industry, we need to adopt automation, artificial intelligence (AI), and digital manufacturing technologies. These technologies will enable our manufacturers to produce parts with improved accuracy, consistency, and scalability, maintaining high standards of quality commensurate with international standards.
• Government Incentives and Policy Stability: A stable, long-term policy framework will be required to generate confidence in the minds of investors and producers. Clear, consistent tax, tariff, and duty policies will promote long-term investment in domestic production. Also, providing tax incentives, subsidies, and low-interest loans to manufacturers and suppliers will render local sourcing a more desirable option.
Takeaway from this article:
Localization is not an endpoint; it is a constantly changing process. We need to see it not only as a money-saver, but as a method of developing a globally competitive automotive industry. While the initial steps towards automotive localization in Pakistan, as discussed in the April 2025 Automark edition, are commendable, achieving sustainable and impactful localization requires a deeper and more systemic approach.
Addressing the gaps in material sourcing, embracing digital manufacturing, establishing a robust testing infrastructure, and proactively preparing for the EV revolution are not merely incremental improvements; they are fundamental prerequisites for building a resilient, competitive, and future-proof automotive ecosystem in Pakistan. The true measure of success will lie not just in the number of vehicles assembled locally, but in the depth and strength of the entire domestic value chain.
The experiences of Vietnam and Thailand give unequivocal blueprints. But the true secret lies in our capacity to act consistently, coordinated, and with vision. By investing in material industries, enabling our local suppliers, and adopting future tech, we can finally graduate out of the CKD cycle and take control of our automotive fate.
This exclusive article has been written by @muhammad-rafique, and published in Automark’s May-2025 printed/digital edition.