Industry voices concern on local manufacturing; others welcome policy direction
Pakistan’s auto industry experts are divided over the federal budget’s potential impact, particularly regarding its alignment with International Monetary Fund (IMF) recommendations and implications for local manufacturing.
Several industry consultants have urged the government to revisit and revise the proposed budget before seeking parliamentary approval, citing potential threats to domestic production.
Speaking to The Express Tribune, auto industry specialist Mashood Khan expressed deep reservations over the finance minister’s speech. He argued that the proposed reduction in customs duty, regulatory duty, and additional levies, while possibly IMF-compliant, could severely undermine local manufacturing capacity.
“The focus appears to be on liberalising imports without safeguarding domestic production. Without a strong local manufacturing base, our import bill will skyrocket and foreign reserves will suffer,” Khan warned. “The policy risks weakening auto parts and other allied industries, making it unclear how the government expects to increase exports in such an environment.”
Khan urged the finance minister to revise the budget with a stronger industrialisation framework to ensure local production can thrive, which he stressed is a prerequisite for meaningful export growth.
Conversely, Economic Strategist and Regional Affairs Analyst Dr. Mehmoodul Hassan Khan offered a more optimistic view. He praised the budget’s emphasis on fostering electric vehicle (EV) adoption, noting that tax incentives and exemptions for EVs align with Pakistan’s target of achieving 30% EV penetration in passenger vehicles and 50% in two- and three-wheelers by 2030.
Dr. Khan also welcomed tax reductions on five-year-old imported vehicles, calling it a move that could offer relief to the average consumer. He described the gradual phasing out of additional duties and regulatory taxes as a balanced reform package aimed at creating parity between locally manufactured and imported vehicles.
He highlighted the government’s decision not to introduce any new regulatory duties, along with a proposed 10% annual reduction in tariffs on used vehicles, as a step that would have “multiplier effects” on market dynamics.
Furthermore, he pointed to the streamlined licensing process for 57 EV manufacturers as evidence of a strategic commitment to sustainable transport and reducing the country’s carbon footprint.
Offering a third perspective, leading automotive consultant Shafiq Ahmed Shaikh described the budget as “balanced and forward-looking.” He commended the proposed National Tariff Programme, noting that the gradual reduction of import duties would align Pakistan’s trade practices with international standards and promote competition within the industry.
According to Shaikh, the planned reduction of general import duties from 20% to 15% over five years, alongside the phasing out of additional and regulatory duties, represents a comprehensive overhaul of the tariff regime. The government also intends to abolish the Fifth Schedule and cap the maximum duty slab at 15%.
“These changes will not only stabilise the local auto market but also enhance Pakistan’s integration into global supply chains,” Shaikh said. “This policy shift was overdue and reflects a move toward export-led growth, as advocated by the IMF.”
He noted that the auto sector currently contributes around 4% of Pakistan’s total tax revenue, but predicted that the new tariff structure would help increase this share by encouraging growth and investment.
