The government has announced that a 40% tariff will be applied on used car imports starting next month, a step aimed at shielding local manufacturers but one that delays immediate benefits for consumers.
In a joint session of the Senate standing committees on finance and industry, Joint Secretary Trade Policy Mohammad Ashfaq confirmed that accidental and low-quality vehicles would not be permitted under the new rules. He added that under the IMF programme, Pakistan is required to allow commercial used car imports of up to five years from September, while removing age and other restrictions completely by July next year.
Currently, commercial imports are restricted, with cars entering through transfer of residence, baggage, and gift schemes. These vehicles account for nearly a quarter of domestic demand, as many buyers prefer imported options over locally produced models.
Ashfaq explained that used car imports will face an additional 40% tariff in comparison with new vehicles during the first phase of liberalisation. This tariff will gradually be reduced to zero within four years, while imports of vehicles up to eight years old will eventually be allowed. Standards will be enforced to avoid environmental concerns linked to older cars.
Pakistan is also obligated to slash overall import tariffs from 20.2% to 9.7% over five years, a 52% reduction. In FY26, rates will drop to 15.7%, achieved by lowering customs duty, additional customs duty, and regulatory duty. Auto sector products carrying 35% customs duty under the Auto Policy will see these phased out from July 2026.
Local Assemblers Blame High Taxes for Soaring Car Prices
Local assemblers, however, argued that trade liberalisation will not bring down prices. Indus Motors CEO Ali Asghar Jamali told the committee that government taxes already account for 30% to 61% of a car’s cost. For small cars, the tax component is 30%, while SUVs such as the Fortuner see 61% of their price going to government levies.
Jamali acknowledged that the industry has failed to improve its public image but stressed that heavy taxation, not manufacturers, is the key reason for high prices. He further stated that it was not the responsibility of private companies to create jobs, a claim that senators challenged.
A Pak-Suzuki representative echoed similar concerns, saying local production has become so expensive that importing and selling cars is now more feasible than manufacturing them domestically.
While industry leaders resisted the new policy, Senator Qadir supported the reduction in protection, noting it would enhance competition and improve safety standards. Committee members, however, criticised local assemblers for offering only two airbags in cars compared to six in imported vehicles, despite manufacturers claiming the quality was the same.