The tire industry in Pakistan is facing a crisis that extends far beyond currency devaluation and raw material costs. It is a battle for survival against a persistent, well-organized threat: illicit imports and smuggling. In 2025, as the government pushes for economic stabilization, the shadow economy for tires continues to thrive, costing the national exchequer billions and undermining every legitimate local manufacturer and dealer.
The Scale of the Problem: A Market Hijacked
The current figures paint a stark picture of a market dominated by the grey channel.
- Market Share: Industry estimates suggest that the legitimate local manufacturing sector and legal imports account for a minority of the total tire consumption. Upwards of 60% of the market is reportedly met by smuggled or under-invoiced tires.
- Revenue Loss: The economic damage is staggering. Recent reports from research bodies estimate that illicit trade in the tires and lubricants sector alone causes an annual tax revenue loss of approximately Rs. 106 billion. This money bypasses the formal economy entirely, crippling the government’s tax collection targets.
- The ATT Loophole: A significant portion of smuggled tires enters Pakistan under the guise of the Afghan Transit Trade (ATT) agreement. Goods, supposedly destined for Afghanistan, are either offloaded prematurely in Pakistani markets or are illegally re-routed back across the porous border at places like Chaman and Landi Kotal.
The Triple Threat: Issues Caused by Smuggling
The influx of non-duty-paid tires is a multifaceted problem affecting the economy, the industry, and the consumer.
1. Economic & Fiscal Damage
By avoiding all duties, taxes, and tariffs, smuggled tires are priced significantly lower than legitimate products. This creates an uneven playing field where local manufacturers cannot compete on cost, leading to reduced profitability, limited expansion, and a lack of foreign investment in a sector that desperately needs it.
2. Compromised Consumer Safety
The tires entering the grey market often consist of two categories:
- Lower-Tier Imports: Tires that may be new but of questionable quality, or sold without genuine warranties and after-sales support.
- Used/Refurbished Stock: Tires (including those intended for colder climates not suited to Pakistan’s high temperatures) that are often deformed during illegal transport and then mechanically repaired or re-treaded. These products are a major public safety hazard on Pakistan’s highways.
3. Deterrence of Local Manufacturing
Despite significant investment by local players to boost radial tire production and capacity, the constant availability of cheap, untaxed alternatives deters new investment. Why would an international brand set up a multi-million-dollar manufacturing plant if a huge chunk of the market is controlled by untaxed goods? This keeps Pakistan reliant on imports, defeating the government’s aim of import substitution.
Pathways to Resolution: Concrete Solutions
A sustained, multi-pronged approach is required to turn the tide against the smuggled shadow and establish a resilient, legitimate tire market.
| Focus Area | Recommended Action (Solution) | Expected Impact |
| Enforcement | Strict Border Digitization & Surveillance: Deploy modern container scanning technologies and risk-based profiling systems at all major ports and border crossings (especially those linked to ATT) to physically check cargo against declared items. | Immediate reduction in the volume of illicit consignments entering the country. |
| Policy & Customs | Reform the Afghan Transit Trade (ATT): Introduce a robust Track and Trace system to monitor the movement of transit goods from port to the border, ensuring that items like tires reach their declared destination. | Elimination of the largest logistical loophole used for revenue evasion. |
| Market-Level Control | Domestic Market Crackdowns: Conduct targeted, high-profile raids on major wholesale markets (like those in Karachi, Lahore, and Peshawar) where large volumes of smuggled stock are known to be sold. Institute deterrent penalties for legitimate dealers found selling non-duty-paid products. | Increased risk for illegal dealers, pushing them toward legal channels and creating a level playing field for honest retailers. |
| Consumer Awareness | National Safety Campaign: Launch a media campaign, in collaboration with local manufacturers and dealers, to educate consumers about the safety risks of using expired, damaged, or poorly stored smuggled tires, linking price saving to life risk. | Shifting consumer preference toward certified, warranted, and safe legitimate products. |
| Industry Incentive | Rationalize Legitimate Import Tariffs: While local manufacturing needs protection, the government should consider rationalizing import duties on raw materials and specialized tires (like TBRs and premium radials) that are not manufactured locally. This would reduce the incentive for smuggling by narrowing the price gap with the grey market. | Lowering the cost burden on legitimate importers and manufacturers, improving their price competitiveness. |
Export to Sheets
The tire on a vehicle is not just a commodity; it is a critical safety component. For the sake of the national economy, local industry, and the safety of every Pakistani driver, the government must move decisively from temporary campaigns to permanent, digital, and policy-driven solutions to roll back the shadow of illicit trade.