Automobiles: The Bright Spot in a Weak Industrial Year

While most industries struggled in FY25, Pakistan’s automobile sector stood out as the strongest performer, recording a massive 46% jump in output compared to last year. This growth came at a time when overall large-scale manufacturing (LSM) declined slightly, falling 0.7% YoY.

What drove the growth?

The surge was broad-based across nearly every category of vehicles:

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• Cars: +42%
• Jeeps: +43%
• Light Commercial Vehicles (LCVs): +158%
• Trucks: +66%
• Buses: +100%
• Motorcycles: +37%

This shows that demand has returned not just in passenger cars but also in heavy transport vehicles, which is often seen as a signal of improved economic activity.

Why the auto sector is rebounding?

Several factors played in favor of the auto industry in FY25:

• Lower interest rates: The State Bank slashed rates from 22% to 11%, making car financing more affordable.
• New model launches: Fresh rollouts kept consumer excitement alive.
• Improving domestic demand: A stable exchange rate and lower energy costs supported household and business confidence.

The road ahead

Looking forward, momentum could stay strong as financing remains attractive and companies continue to introduce new models. However, there are challenges too. The FY26 budget raised taxes and cut tariffs, which may put some pressure on demand and margins.

Despite the broader slowdown in Pakistan’s industries, the auto sector raced ahead in FY25. With double- and even triple-digit growth across segments, it was the clear winner in an otherwise gloomy industrial picture. The big question now is whether this momentum can continue into FY26 or if higher taxes will slow down the ride.

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Source: Foundation Securities

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →