Pakistan's automotive sector has ground to a halt on hybrid vehicle production, with industry leaders warning that without immediate policy intervention, they may soon be unable to pay salaries. The crisis, aired before a Senate committee this week, stems from conflicting tariff policies that incentivize imports while burdening local manufacturers. Main Developments Industry representatives told the Senate Standing Committee on Industries and Production, chaired by Senator Saleem Mandviwalla, that not a single plug-in hybrid vehicle has been produced locally in the past 22 days. They cited the absence of a defined tariff structure as the primary cause. Read also: S&P Upgrades Pakistan's Credit Rating to 'B' on IMF Reforms The government recently slashed tariffs on imported vehicles while refusing to lower duties on raw materials, creating a cost disadvantage for domestic producers. Last week alone, about 2,000 vehicles arrived at Karachi Port, flooding the market with imports. Ministry of Industries and Production officials countered that all recent imports were electric vehicles, part of a government push to promote EV adoption. But auto manufacturers warned that if the situation persists for another seven days, they will lack funds to pay salaries. Background Pakistan's automotive market has stagnated for two decades. In 2003, the country produced 200,000 vehicles annually—comparable to Indonesia's 300,000. Today, Indonesia manufactures 1.3 million vehicles annually, while Pakistan remains at the same 200,000 level. During the same period, the government entered Free Trade Agreements that, combined with security concerns, have hindered exports. The Auto Parts Manufacturers Association reported that duties on finished vehicles were reduced in the budget, but raw material duties were left unchanged. The industry collectively employs 1.8 million people, with parts manufacturing generating eight times more jobs than basic assembly. Stakeholders argue that the local industry was never given the policy support needed to scale up. Why It Matters Pakistan's commitments under the IMF's Extended Fund Facility require phasing out incentives and prohibiting sales from Export Processing Zones to the domestic tariff area. This framework complicates any tariff relief the government might consider. Senator Mandviwalla urged private stakeholders and the Ministry of Industries to collaborate on unified proposals ahead of IMF review meetings. Without a coherent policy, the country risks losing both domestic production capacity and the jobs of 1.8 million workers. The government's EV push, while environmentally positive, has created unintended consequences: slashing import tariffs to boost EV adoption has undercut local hybrid production, leaving manufacturers without a clear path forward. What's Next Special Assistant Haroon Akhtar announced that the Tariff Policy Board will meet to address the issue. He expressed confidence that once the auto policy is finalized, industry problems will be resolved. The Senate committee scheduled a joint meeting of the Ministry of Commerce and the Ministry of Industries and Production for next week. Automotive stakeholders have been directed to formally submit their grievances in writing. The committee also agreed to submit recommendations to the federal cabinet advocating for amendments to the rules of procedure governing the Export Processing Zones Authority, aiming to streamline leadership appointments after prolonged vacancies.