Currently, total duties on imported vehicles range from 96% to a steep 475%.
The chairman of the All Pakistan Motor Dealers Association (APMDA), Haji Muhammad Shehzad, anticipates that the upcoming federal budget will bring significant relief for used car buyers, including reduced import duties and an extension of the age limit for used car imports from the current three years to five years.
In an exclusive interview with Express News, Shehzad said these changes align with Pakistan’s agreement with the International Monetary Fund (IMF), under which the country has committed to gradually relax restrictions on car imports.
He stated that Pakistan has assured the IMF of reducing heavy duties and taxes on used cars over the next five years, either through lower sales taxes or revised customs duties.
Currently, duties on imported vehicles range from 96% to as high as 475%. However, Shehzad explained that these rates will be reduced by about 20% annually over the next five years.
He noted that alongside the age limit extension to five years, these duty cuts could slow the sale of locally assembled vehicles while boosting the market for used cars under various schemes. Reduced tariffs on new and used vehicles would also lower overall prices.
Shehzad highlighted that allowing five-year-old cars—particularly for commercial use—could significantly bring down car prices in Pakistan. He mentioned that a five-year-old Japanese car costs almost half of what a three-year-old model does. For example, while a three-year-old vehicle may cost $8,000, a five-year-old one might be priced at $3,500 to $4,000, leading to potential savings of Rs 500,000 to Rs 1 million for buyers.
He suggested that if these measures are implemented, small car prices could fall by as much as Rs 1 million. The cheapest locally assembled car currently costs Rs 3.1 million, but a similar model in a neighboring country costs around Rs 375,000. Even accounting for exchange rates, that would translate to Rs 1.3 million here, Shehzad explained. With the proposed duty reductions and age limit extension, high-quality Japanese cars could be available to Pakistani buyers for under Rs 2 million.
Shehzad further stated that if the government fully implements these IMF-driven changes, used car imports could surge to 70,000–80,000 units next fiscal year from the current 30,000, potentially boosting government revenue by up to 70%.
He argued that these reforms would not only make cars more affordable for consumers but would also challenge the dominance of local assemblers, encouraging them to improve quality and shift towards full-scale manufacturing. “We haven’t achieved true localisation; we’re still relying on CKD kits. Competition from imports will push local assemblers to improve, and removing these duties will spur market competition and benefit the local industry,” Shehzad said.
He concluded that incorporating these IMF recommendations in the budget would be a positive step for the auto sector, the public, and the government. “People will get affordable, high-quality cars, the government will see increased revenue, and local assemblers will have to raise their standards.”
As the debate around structural reforms in Pakistan’s auto sector grows, industry experts are weighing in on policy proposals tied to the IMF’s economic recommendations and the National Tariff Policy 2025–30.
Automotive consultant Shafiq Ahmed Shaikh views the IMF’s involvement in the auto sector as an opportunity to find long-term solutions. “It’s an important issue that must be discussed with industry stakeholders for long-term and acceptable reforms,” he said. “We know electric vehicles (EVs) are the future, and most will come from China, so now is the time to create sustainable policies and incentives for EVs and their accessories to foster investment and job creation.”
Paapam’s Concerns
However, Shehryar Qadir, Senior Vice Chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) and Executive Director at Jin Kwang JAZ Limited, has voiced serious concerns about reports that the government may reduce peak customs duties on completely built units (CBUs) to 15% and lower duties on completely knocked down (CKD) kits by 2030 under the National Tariff Policy 2025–30.
While this proposal aims to meet IMF liberalisation targets and boost export-led growth, critics like Paapam warn it could trigger de-industrialisation and erode decades of local investment.
Shehryar argued that this move would undermine the competitiveness of domestic parts manufacturers, potentially pushing them out of the market—a concern echoed by Mashood Ali Khan.
Indus Motor CEO Ali Asghar Jamali also weighed in, calling for revising the financing limit for vehicles from Rs 3 million to 70% of the retail price and extending financing terms from three to seven years. He supported offering tax and duty exemptions to overseas Pakistanis buying locally made vehicles through foreign currency accounts to shift demand from used imports.
He also advocated for tax and duty breaks for vehicle exporters to boost international competitiveness, as well as signing free trade and preferential trade agreements to enhance global market access for Pakistani vehicles.
Regarding used car imports, Jamali said they should be restricted because they hamper economic growth, encourage tax evasion, and feed the grey market. Pakistan’s passenger vehicle manufacturing capacity stands at 500,000 units annually, but 76% remains unused.
He called for maintaining a clear tariff differential between CKD and CBU imports to incentivise local assembly, create jobs, and spur economic growth. A stable and consistent automotive policy is crucial, he argued, to ensure long-term development and avoid abrupt policy shifts. This should include a comprehensive policy to support the local production of essential materials like steel, resin, aluminium, and copper, citing India’s steel policy as a successful example.
Jamali also called for rationalising the tax system for locally assembled cars to create a fair playing field versus used imports and suggested adjusting the depreciation rate for imported used vehicles from 1% to 0.5% to boost government revenue.
Last week, auto industry stakeholders met with Haroon Akhtar Khan, Special Assistant to the Prime Minister on Industries, to discuss these tariff-related issues.
Despite previous policy commitments to fully localise auto parts through a 100% deletion program, progress has been slow, with most components still being imported.
Read More: Auto parts makers fear halt to development
Haroon assured participants that the concerns of parts manufacturers, especially about the proposed 15% customs duty, would be formally presented to the Tariff Policy Board. He stressed the government’s commitment to domestic industry support and asked Paapam to submit a detailed report on the tariff protection needed for competitiveness and sustainability.
Reaffirming Prime Minister Shahbaz Sharif’s promise that industries showing increased productivity would be eligible for incentives, Haroon urged Paapam to trust the government’s leadership and continue engaging in dialogue.
Paapam was asked to provide concise follow-up reports ahead of the next meeting to keep the discussions moving forward.
