The upcoming federal budget is set to introduce major reforms in Pakistan’s automotive sector that could make car ownership significantly more affordable for millions. According to H.M. Shahzad, Chairman of the All Pakistan Motor Dealers Association, the government plans to substantially reduce import duties on used vehicles while extending the permissible import age limit from 3 to 5 years.
This policy shift comes as part of Pakistan’s commitments to the IMF and could revolutionize the country’s auto market. Industry analysts predict these changes may reduce prices of small imported used cars by PKR 500,000 to 1 million, potentially bringing quality Japanese vehicles within the PKR 2 million price range for the first time in years.
The reforms address several critical issues in Pakistan’s automotive sector. Currently, locally assembled small cars cost about PKR 3.1 million – nearly double the price of comparable vehicles in neighboring markets even after accounting for currency differences. The high import duties (ranging from 96% to 475%) have long protected domestic assemblers while pricing most consumers out of the market.
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These changes are expected to create a more competitive auto market by breaking the local assemblers’ monopoly. The influx of quality used imports will likely force domestic manufacturers to improve their standards and increase localization efforts beyond the current reliance on CKD kits.
From a macroeconomic perspective, the policy could prove beneficial for government revenues. Used car imports may surge from the current 30,000 units annually to 70,000-80,000 units, potentially increasing customs revenue by up to 70% despite lower duty rates.
The proposed five-year implementation plan would gradually reduce duties by 20% each year, allowing for a smooth market transition. This measured approach aims to balance consumer benefits with the need to give domestic manufacturers time to adjust their business models.
If implemented effectively, these reforms could achieve a rare triple win: making quality vehicles more affordable for Pakistani consumers, increasing government revenue, and ultimately improving the competitiveness of Pakistan’s domestic auto industry through increased market competition.
