ISLAMABAD
The Pakistan Institute of Development Economics (PIDE), under its RASTA Competitive Grants Programme, organized a seminar on “Automotive Value Chains in Pakistan” featuring Dr. Muhammad Shafaat Nawaz, RASTA Fellow and Fulbright Scholar, moderated by Dr. Usman Qadir, Senior Research Economist and Director (CITDE), PIDE.
Dr. Nawaz presented findings from his doctoral research on OEM-mediated Global Production Networks (GPNs) in Pakistan’s automotive industry — a study funded jointly by the Fulbright Program (U.S. Department of State), PIDE’s RASTA CGP Round 4, and the American Association of Geographers.
His research redefines how Pakistan integrates into global value chains and introduces the concept of OEM-mediated GPNs, where Original Equipment Manufacturers (OEMs) act as intermediaries between global lead firms and local suppliers, shaping industrial outcomes, technological upgrading, and regional development.
Drawing on 72 interviews, a survey of 319 local firms, and advanced network analysis, Dr. Nawaz revealed that three Japanese firms — the “Big Three” — dominate 99% of Pakistan’s passenger car market and 89% of light commercial vehicles, creating a highly oligopolistic structure. The tractor segment is equally concentrated, with two firms controlling 99% of production, while Atlas Honda retains about 67% of the motorcycle market.
These OEMs, operating as subsidiaries, partners, or licensed producers, have enabled Pakistan’s entry into global value chains but have also restricted innovation, exports, and research autonomy. Unlike other developing economies that attract high-value global suppliers such as Bosch or Denso, Pakistan’s auto sector lacks indigenous R&D and technology transfer linkages.
Dr. Nawaz classified local firms into three main categories: captive vendors, bound by low-value repetitive contracts; emerging suppliers, who gain autonomy through international certifications like IATF 16949 and participation in global trade exhibitions; and aftermarket producers, who perform low-technology subcontracting for local markets.
His analysis demonstrated that a one-unit increase in OEM business share leads to a 0.09-unit rise in annual business growth, statistically significant at the 0.001 level. However, this growth largely benefits firms that successfully diversify and upgrade, while others remain locked in dependency cycles. — DNA
