By Farooq Awan

The entry of new vehicle assemblers into Pakistan’s automobile industry is gradually increasing competition in the domestic market, marking a shift from the earlier structure in which only a few companies dominated vehicle production.

The number of manufacturers participating in the sector has expanded over time, contributing to greater market participation and diversification, according to a study on Pakistan’s automobile industry prepared by the Centre of Excellence in Competition Law at the Competition Commission of Pakistan.

The report notes that thirteen automobile assemblers are currently operating in Pakistan, reflecting a significant change from earlier decades when the market was dominated by a small group of producers.

Historically, limited competition characterized the country’s automobile industry, with only a few assemblers controlling most of the vehicle production. This structure constrained the variety of models available to consumers and reduced competitive pressure within the market.

According to the study, the structure of the industry began to evolve through policy reforms aimed at encouraging new investment and expanding manufacturing capacity.

One of the major initiatives was the Automotive Development Policy 2016–21, which introduced incentives for investors interested in establishing vehicle assembly plants in Pakistan. The policy aimed to attract new entrants and improve competition in the automotive sector.

As a result, several new companies entered the market alongside existing manufacturers, increasing the number of assemblers involved in vehicle production.

The report notes that the growing presence of manufacturers has contributed to a gradual reduction in market concentration, reflected in trends in the Herfindahl-Hirschman Index (HHI), a commonly used indicator of market concentration. A declining HHI generally signals that competition in the market is increasing as more firms participate in production.

With more assemblers operating in the sector, a wider range of vehicles is now produced in Pakistan. These include passenger cars, sport utility vehicles, light commercial vehicles, trucks, buses, tractors, and two- and three-wheelers.

The study also notes that increased participation by new firms has improved market contestability by expanding consumer choice and encouraging greater product variety.

At the same time, the industry’s expansion reflects the gradual diversification of Pakistan’s automobile manufacturing base, with companies operating through joint ventures, foreign partnerships, and domestic investment arrangements.

Despite this progress, the report highlights that the sector still faces structural challenges that affect competition and production performance, including fluctuations in domestic demand, policy uncertainty, and broader economic conditions.

Nevertheless, the presence of thirteen assemblers in the market indicates that Pakistan’s automobile industry is gradually moving away from its earlier structure of limited participation toward a more competitive and diversified manufacturing environment.

Credit: INP-WealthPk