PAAPAM Calls for End to Rs3 Million Limit on Car Loans in Pakistan
Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) has once again urged the government to remove the Rs3 million cap on Car Loans in Pakistan stating that the existing limit is outdated and is slowing down growth in Pakistan’s automotive sector. According to the association, easing auto financing restrictions is essential to revive consumer demand, support local manufacturers, and strengthen the overall automotive ecosystem.
PAAPAM believes that the current policy does not reflect the realities of today’s car market, where prices of even small locally assembled vehicles have crossed the Rs3 million mark. As a result, a large number of potential buyers are unable to benefit from bank financing, leading to weak sales and underutilized production capacity.
Why the Rs3 Million Car Loan Limit Is a Problem
Over the past few years, car prices in Pakistan have increased sharply due to:
- Currency depreciation
- Higher import costs
- Increased taxes and duties
- Rising energy and raw material prices
PAAPAM officials argue that when the car loan limit was introduced, vehicle prices were significantly lower. Today, however, most locally manufactured cars fall outside the Rs3 million financing cap, making the policy ineffective for middle-income buyers.
The association says that limited financing options are discouraging consumers from purchasing new locally assembled vehicles, directly impacting production volumes and employment in the sector.
Impact on Local Automotive Industry
PAAPAM represents hundreds of local auto parts manufacturers who supply components to car assemblers across Pakistan. According to the association, weak car sales affect the entire supply chain, including:
- Auto parts manufacturers
- Vendors and small workshops
- Logistics and transport services
- Showrooms and dealerships
When car production slows down, it results in reduced orders for locally manufactured parts, putting pressure on small and medium-sized enterprises that rely heavily on the automotive sector.
Boosting Demand Through Easier Financing
PAAPAM believes that relaxing car loan limits would immediately improve market conditions. Easier financing would:
- Increase demand for locally assembled cars
- Encourage buyers to switch from used imported vehicles
- Improve production capacity utilization
- Support job creation
The association has emphasized that improved financing does not only benefit consumers but also helps the government through increased tax revenues generated from higher vehicle sales and local manufacturing activity.
Government Engagement With Auto Sector
The renewed demand from PAAPAM comes after Federal Minister for Commerce Jam Kamal Khan visited the Bin Qasim automotive cluster, a major hub for vehicle assembly and auto parts manufacturing in Pakistan.
During his visit, the minister toured several manufacturing facilities and observed the production of locally made automotive components. He praised the quality of domestic parts and acknowledged the sector’s contribution to employment and industrial growth.
Automotive Sector’s Economic Importance
Jam Kamal Khan highlighted that the automotive industry plays a crucial role in:
- Job creation
- GDP contribution
- Technology transfer
- Industrial development
He stated that with consistent policies and proper government support, Pakistan’s automotive sector has the potential to grow significantly in the coming years.
The minister also pointed out that the government’s strategy to limit used car imports is aimed at encouraging local production and reducing pressure on foreign exchange reserves.
Production Growth Potential
According to Jam Kamal Khan, Pakistan’s annual car production currently stands at under 200,000 units, but with the right mix of policies, financing support, and investor confidence, production could increase to as much as 1 million units per year.
Such growth would:
- Attract local and foreign investment
- Expand employment opportunities
- Strengthen allied industries such as steel, plastics, and electronics
PAAPAM agrees with this assessment and believes that improving auto financing is one of the most important steps toward achieving this growth target.
PAAPAM Supports Pro-Local Manufacturing Policies
PAAPAM has welcomed recent government policies that favor local manufacturers and discourage excessive reliance on imported vehicles. The association believes that these measures, combined with better financing options, can help Pakistan build a stronger and more self-reliant automotive industry.
However, PAAPAM has stressed that policy support must be consistent and long-term to give confidence to investors and manufacturers planning future expansions.
Consumer Perspective
From a consumer point of view, the Rs3 million car loan cap has limited choices in the market. Many buyers who rely on bank financing are forced to:
- Delay car purchases
- Buy older used vehicles
- Opt for imported used cars
PAAPAM argues that removing or significantly increasing the financing cap would allow consumers to purchase newer, safer, and more fuel-efficient locally assembled cars.
What the Industry Is Demanding
PAAPAM’s key demands include:
- Removal or revision of the Rs3 million car loan limit
- More flexible auto financing policies
- Stable and predictable automotive policies
- Continued support for local manufacturing
The association believes that these steps are necessary to unlock the full potential of Pakistan’s automotive sector.
Conclusion – Car Loans in Pakistan
The call by PAAPAM to end the Rs3 million limit on car loans highlights the growing disconnect between current auto financing policies and market realities. With car prices rising and consumer purchasing power under pressure, restrictive financing rules are hurting demand and slowing industrial growth.
Industry stakeholders believe that revising the car loan cap could play a vital role in reviving sales, supporting local manufacturers, creating jobs, and driving long-term economic growth. As discussions continue between the government and industry representatives, the automotive sector is hopeful that practical policy decisions will be taken to support sustainable development in the years ahead.
