Auto sector woes: What's good for Australia may not be good for Pakistan

Business Recorder

18 hours ago

As a lingering post-colonial inferiority complex continues to shape our national thinking, many still look to the West as a shining example – a blueprint for modernity.
But what works for their today may not be what Pakistan needs for its tomorrow. As our policy-makers inch closer to opening used car imports and scaling back support for the local industry, decisions that could trigger rapid deindustrialisation and the quiet, seemingly permanent closure of Pakistan's automotive sector, they would do well to pause.
On the surface, it may appear that 'even Australia did it.' But scratch deeper, and the differences couldn't be starker.
In 2010, Australia had an 80-year-old automobile industry that was producing a around 239,443 vehicles annually to fulfil local demand.
Pakistan's auto policy: fueling imports, killing industry
But something else happened that year too. The Australian government liberalised the sector by reducing tariffs to just 5%, expecting global efficiency and higher exports. The result: swift deindustrialisation. Multinational brands found it cheaper to shut local operations and import from their foreign plants.
By 2017 all local plants had closed. Yet interestingly, global brands like Toyota continued to dominate. It was number one in 2017, and still the market leader in 2024. And the market size? Still hovering around 1.2 million vehicles, 7 years later.
The difference? A decade ago, those cars were built by Australians, using locally made components made with cutting-edge technology. Today, they're all imported. If a mature, exporting industry couldn't survive liberalisation, what hope does a nascent Pakistani industry have?
But Australia liberalised its auto sector from a position of strength. It was a post-industrial, high-income economy characterised by high-value exports, strong services and mining sectors, and clear alternatives to cushion the shock.
Pakistan, by contrast, is still in the early stages of industrial maturity. The direction we're being nudged toward seems driven by abstract ideas of 'efficiency' and 'resource reallocation.' In theory, this sounds great. In practice, it's dangerously vague.
Where exactly are these so-called 'more efficient' destinations for capital? Has anyone mapped them? Is the investment already sunk into the automotive sector ready to be reallocated? Have the 2.5 million people directly or indirectly employed in the ecosystem been offered meaningful alternatives? Or are policymakers once again making decisions in haste, without regard for the industrial ecosystem they're about to dismantle?
Australia's withdrawal was strategic, a pivot to areas better suited to its demographic and economic structure. But what is Pakistan pivoting to?
With a population of 240 million, Pakistan has no shortage of labour or talent. Nor does it benefit from a surplus of high-value service exports. So why spend scarce foreign reserves importing fully built-up vehicles, when it can use that same capital to feed its own manufacturing base, grow the domestic parts industry, and build a more self-reliant, value-adding automotive ecosystem?
By 2010, Australia had completed its industrial learning curve. It had built the technical foundations that the automotive value chain naturally fosters – process engineering, supply chain integration, metallurgy, systems design. Pakistan, on the other hand, is still climbing that curve. Shutting it down now would be like dropping out of university before the first exam and calling yourself overqualified.
Policy mimicry without context is a shortcut to structural ruin.
Are we really choosing our future – or merely imitating someone else's past? It's time we learn to read our own map.
The article does not necessarily reflect the opinion of Business Recorder or its owners.