Govt Moves to Regulate Used Car Imports
In a major policy shift, the government announced on Monday that accidental car imports will be banned and a 40% new tax will be imposed on commercial imports of used cars starting next month. The move, part of commitments made under the International Monetary Fund (IMF) programme, is aimed at protecting local assemblers but delays any immediate price relief for consumers.
Currently, commercial imports are restricted, with most used cars entering Pakistan through the transfer of residence, baggage, and gift schemes. These account for nearly 25% of total demand, as buyers prefer imported slightly accidental vehicles over locally assembled models.
IMF’s Role in Trade Liberalisation
According to Joint Secretary Trade Policy Mohammad Ashfaq, Pakistan has agreed with the IMF to gradually open the auto sector to imports:
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From September 2025, commercial imports of five-year-old used cars will be allowed.
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By July 2026, age and other restrictions on imports will be completely lifted.
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The 40% import tariff will be reduced to zero over four years.
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Eventually, imports of six to eight-year-old vehicles will also be permitted under stricter quality and environmental standards.
Pakistan is also bound to cut overall import tariffs from 20.2% to 9.7% in five years, including phasing out additional customs duties, regulatory duties, and reducing slabs to a top rate of 15%.
Local Assemblers Push Back
Local carmakers, represented by the Pakistan Automotive Manufacturers Association (PAMA) and the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), strongly opposed the IMF-driven policy.
Ali Asghar Jamali, CEO of Indus Motors, told the Senate standing committee that car prices would not fall despite trade liberalisation, as taxes account for 30% to 61% of total vehicle cost.
Examples shared by Jamali:
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Small cars: 30% tax share (Rs32,935 combustion levy included)
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Toyota Altis: 44% of price is taxes
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LCV Pickup: 60% tax share
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Toyota Fortuner SUV: Rs24.42m price, Rs14.8m (61%) in taxes
He bluntly remarked that it was not the private sector’s responsibility to create jobs, sparking criticism from lawmakers.
IMF Pushes for Greater Autonomy of Pakistan’s Central Bank
A Pak-Suzuki Motors representative added that producing cars locally was becoming “too costly” and it would soon be cheaper to import and sell used cars rather than manufacture them in Pakistan.
Safety Standards & Consumer Concerns
Lawmakers grilled assemblers for charging high prices while compromising on safety.
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Imported cars typically have six airbags, while local vehicles offer only two airbags.
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Despite this, assemblers argued that local and imported vehicles were of “similar quality” — a claim rejected by senators.
Senator Qadir supported the policy shift, saying withdrawal of protection would push local manufacturers to improve efficiency and safety.
What This Means for Consumers
While the new policy theoretically opens doors for cheaper used car imports, the 40% tariff protection ensures that prices won’t drop immediately.
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Short-term: Car prices are unlikely to fall, as both import duties and high local taxes remain in place.
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Medium-term: As tariffs phase out over four years, consumers may see greater variety and competition.
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Long-term: If safety and quality standards are enforced, Pakistani buyers could benefit from safer and more affordable cars.
Conclusion
The government’s new auto import policy — banning accidental vehicles and adding a 40% tariff on used car imports — reflects its balancing act between IMF commitments and local industry protection. But with taxes still making up more than half the cost of some vehicles, consumers may have to wait years before seeing meaningful relief in car prices.
Further Read: IMF
