Your Custom Post Type, by default, has an archive so you should really be using that, in which pagination will work.
If your post type is called ‘products’ then your archive will be at:
http://www.yoursite.com/products/
You then don’t need to do the WP_Query as the query has already been executed by WordPress.
If you need to change any arguments such as post_per_page you should use the pre_get_posts() hook.
WP_Query is usually just used for running secondary queries on a page, where in this case it looks like you can use the main query.