Pakistan’s new auto policy is nowhere to be seen, but car sales continue to grow. What is changing is the composition of demand. Conventional internal combustion engine (ICE) vehicles, particularly those produced by the three Japanese manufacturers, are enjoying a resurgence, while parts of the new-energy vehicle (NEV) market are struggling with uncertainty over taxation. The government may be taking its time deciding the future of the industry, but consumers are making their choices in the meantime.
According to the Pakistan Automotive Manufacturers Association (PAMA), sales of passenger cars, SUVs and pickups increased by 19 percent year-on-year to 50,480 units in the first quarter of FY27. Within this, passenger car sales grew by 43 percent to 41,872 units, raising their share of the reported market from 69 percent in 1QFY26 to 83 percent in 1QFY27. The combined share of the three Japanese manufacturers—Suzuki, Toyota and Honda—also increased from 82 percent to 86 percent over the same period.
However, PAMA numbers tell only part of the story. Several significant manufacturers and importers do not report their sales to the association, including Kia, Changan, Omoda and Jaecoo, BYD, MG and GAC. Based on market intelligence gathered by BR Research, these players collectively sold approximately 20,000 vehicles during the quarter, including completely built-up (CBU) imports. This takes estimated industry-wide sales to around 70,000 units, significantly above the volumes captured by official industry statistics.
Suzuki remains the market leader, with reported sales of 22,615 units, followed by Toyota at 13,260 units. Honda, with 7,401 units, is holding on to third place, although competition from Chinese manufacturers is getting closer. The Japanese manufacturers have benefited from the revival in conventional passenger car sales, while tax uncertainty has made some competing technologies less attractive to buyers.
The numbers at the model level are revealing. Suzuki Alto remains the country’s bestselling car, with sales increasing by 42 percent to 15,910 units in 1QFY27. Toyota’s Corolla, Yaris and Corolla Cross collectively recorded a 43 percent increase to 10,925 units, while Honda’s Civic and City sales rose by 86 percent to 7,103 units. Established Japanese models are gaining ground at a time when much of the industry’s attention has shifted towards electrification.
Among non-Japanese manufacturers, Changan is leading with estimated quarterly sales of around 7,000 units. Its Deepal S05 has emerged as a major success, accounting for roughly 40 percent of the company’s sales. Omoda and Jaecoo, assembled under Nishat Group’s Chinese automotive venture, follow with approximately 4,500 units. BYD and Sazgar each sold more than 3,000 vehicles, while MG is gaining traction with its newer models, recording sales of over 2,000 units.
The performance of the Korean brands is considerably weaker. Kia and Hyundai together sold only around 3,200 units during the quarter, with Hyundai accounting for approximately 70 percent. Lucky Motor’s sales across its portfolio, including Kia and GAC, remained below 1,500 units. The contrast with Nishat is striking: while its Hyundai business is struggling, its Chinese automotive venture is enjoying strong demand. The market is increasingly rewarding the right product and technology rather than the nationality of the local assembler.
Sazgar presents another interesting case. Its Haval and Tank sales declined by around 12 percent year-on-year to 3,137 units, despite the successful introduction of the Tank. Competition has intensified, while the uncertainty surrounding hybrid vehicle taxation appears to be affecting demand for its established models. New product launches are helping, but not enough to offset weakness elsewhere in the portfolio.
The bigger story lies in the shifting fortunes of different new-energy technologies. Pakistan does not yet have a comprehensive public database separating battery electric vehicles (BEVs), range-extended electric vehicles (REEVs), plug-in hybrids (PHEVs) and conventional hybrids (HEVs). However, BR Research’s market estimates suggest that combined BEV and REEV sales were around 6,000 units in 1QFY27, with REEVs accounting for almost half. PHEV sales, meanwhile, stood at approximately 3,500 units, implying a considerably lower monthly sales average than during January-June 2026.
This divergence is not entirely a matter of consumer preference. Tax policy has become a major determinant of which technologies are selling and which are losing momentum. Before the FY27 budget, locally assembled hybrid vehicles enjoyed concessional general sales tax rates of approximately 8.5 to 12.75 percent. These concessions expired in June, pushing applicable rates to 25 percent. The government subsequently reduced the rate to 18 percent for qualifying locally manufactured hybrids with engine capacities of up to 2,000cc, but uncertainty over the treatment of different hybrid technologies remains.
The market is now anticipating further concessions for PHEVs under the forthcoming auto policy. Nothing has been formally settled, but expectations of lower taxes are already affecting commercial decisions. Assemblers have an incentive to delay production or invoicing, while prospective buyers would rather wait than purchase a vehicle that could become substantially cheaper once the new policy is announced. Some are switching to alternatives instead.
BEVs and REEVs have been operating under a more favourable tax regime. The one percent sales tax concession for eligible vehicles has been extended for another year, alongside favourable duties and other import incentives. Higher petroleum prices have strengthened the economic case for these technologies, particularly where the difference in upfront prices is offset by lower running costs. BYD reportedly sold around 2,500 fully electric CBU units during the quarter, while Changan’s locally assembled Deepal S05 has achieved comparable volumes in the REEV category.
These differences help explain why demand is moving unevenly across vehicle technologies. The conventional Japanese models are benefiting from stronger overall demand and fewer immediate tax-related complications, while BEVs and REEVs are taking advantage of more favourable fiscal treatment. PHEVs and some HEVs, meanwhile, are caught between higher current taxes and expectations of future relief. The apparent resurgence of ICE vehicles should therefore not be mistaken for a wholesale rejection of electrification.
There is also a wider policy contradiction. With petroleum prices elevated, Pakistan has an economic incentive to encourage technologies that reduce fuel consumption and dependence on imported oil. Yet an inconsistent tax regime is distorting the very transition the government claims to support. The distinction between BEVs, REEVs, PHEVs and HEVs matters, both technologically and fiscally, but the treatment of these vehicles should follow a coherent long-term framework rather than successive temporary concessions.
The auto industry is at a crossroads. Chinese manufacturers have introduced new technologies and intensified competition in a market long dominated by Japanese assemblers. Consumer interest in electric and hybrid vehicles is evident, and rising fuel prices should support that transition. But investment in assembly capacity, localisation and new model introductions requires greater certainty than the government is currently providing.
The new auto policy must settle the tax treatment of competing technologies and provide a predictable framework for both locally assembled and imported vehicles. Otherwise, investment and purchasing decisions will continue to be driven by speculation over the next tax concession rather than underlying product economics. The delay is not stopping Pakistanis from buying cars. It is increasingly determining which cars they buy.