KARACHI —
Experts from Pakistan’s automotive sector have urged the government to formulate a long-term policy and provide relief measures for the industry and consumers, emphasizing the importance of stability for national economic growth.
Automotive consultant Shafiq Ahmed Shaikh noted that the International Monetary Fund’s (IMF) growing interest in the auto sector is promising, as it will help bring longstanding issues to the forefront and facilitate sustainable solutions. The IMF’s proposal to remove restrictions on used car imports has raised concerns, as these vehicles would compete directly with local manufacturers. A recommendation to phase out duties on vehicles could also be transformative.
Policymakers say that easing trade barriers, phasing out the Additional Customs Duty (ACD), and slashing the Regulatory Duty (RD) by 80% will reduce the weighted average tariff from 10.6% in FY25 to 7.4% by FY30. These measures are expected to lower local vehicle prices, boost exports, and improve vehicle affordability — but they will also reduce protection for the domestic auto sector.
“It’s a sensitive matter that needs thorough discussions with the auto industry and other stakeholders for a long-term, mutually acceptable outcome,” Shaikh said. He also highlighted the future importance of electric vehicles (EVs), noting that many will come from China, so the government should establish a sustainable policy framework and incentives for EVs and related investments to create jobs.
Indus Motor Company CEO Ali Asghar Jamali called for raising the financing limit from Rs3 million to 70% of a vehicle’s retail price and extending the loan tenure from three to seven years. He also suggested that overseas Pakistanis be encouraged to purchase locally manufactured cars through tax and duty exemptions if payments are made in foreign currency — a step that could shift demand away from used vehicle imports.
Jamali further advocated tax and duty incentives for vehicle exporters to make Pakistani cars more competitive internationally. He emphasized the need for free trade and preferential trade agreements to expand market access and global competitiveness.
On the topic of used car imports, Jamali argued for restrictions, as these imports hurt economic growth, fuel tax evasion, and support the grey market. Pakistan’s passenger vehicle manufacturing capacity stands at 500,000 units per year, yet only 24% of this capacity is utilized. Maintaining a clear tariff differential between Completely Knocked Down (CKD) and Completely Built-Up (CBU) units would incentivize local assembly, generate jobs, and strengthen the economy.
He called for a consistent policy framework for the auto sector to ensure long-term growth and reduce disruptions from frequent policy shifts. This includes policies to support the local production of key raw materials like steel, resin, aluminium, and copper. He cited India’s steel policy as an example of how supportive frameworks can enable countries to become net exporters.
Jamali also suggested rationalizing taxes on locally manufactured vehicles to level the playing field against used imports and proposed adjusting the depreciation rate for used car imports from 1% to 0.5% to boost government tax revenue.
Meanwhile, Shehryar Qadir, Senior Vice Chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) and Executive Director of Jin Kwang JAZ Limited, expressed alarm over government discussions to lower peak customs duties on CBUs to 15% and even further for CKD units by 2030 under the National Tariff Policy 2025-30.
Although positioned as a structural reform to drive export-led growth and align with IMF’s liberalization agenda, critics warn that the move could reverse decades of investment in Pakistan’s auto sector and lead to de-industrialization. Paapam has emerged as a prominent voice against the plan, cautioning that it could jeopardize around one million direct and indirect jobs and undermine investor confidence in Pakistan’s industrial policies.
Paapam highlighted the additional challenges local parts manufacturers face, including higher freight costs (since raw materials like steel, plastic resin, and rubber are not produced locally), costly financing, and limited economies of scale. A recent study submitted by Paapam to the Engineering Development Board (EDB) found that Pakistani parts makers face a 34% cost disadvantage compared to regional peers.
