The International Monetary Fund (IMF) has called on Pakistan to lower tariffs on imported cars—particularly used vehicles—and phases out protectionist policies favoring domestic car assemblers.
This is part of general structural changes under the IMF lending program aimed at raising competition and efficiency in the auto industry of Pakistan.
Though this proposal has come as a relief to car importers and dealers, local manufacturers are seriously concerned that the step would hurt domestic employment and manufacturing.
Used car imports to get major relief
At present, Pakistan imports used cars only under the gift scheme, subject to the condition that the vehicle should not be older than three years. The IMF has, however, suggested removing this condition to permit import of cars up to five years old. This will greatly reduce the prices of imported used cars as well as enlarge consumer choice.
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Pakistan’s automobile industry is under “severe trade restrictions” and the abolition of taxes and customs duties is key to a level playing field, states the latest country report by the IMF. The report also suggests phasing out customs duties, additional duties, and regulatory duties on import of vehicles and auto parts by 2030.
National tariff policy under review
The Pakistani government is presently considering its National Tariff Policy (NTP) and is likely to introduce new regulations by July 2025. The Engineering Development Board (EDB), which oversees the auto sector, has proposed reducing the maximum tariff slab from 20% to 15%, and phasing out additional duties and regulatory duties within four to five years.
Officials have indicated that the government may introduce legislation this year to ease the import of used vehicles and begin reducing tariffs on the auto sector from the next fiscal budget.
Local industry raises red flags
The Pakistan Automotive Manufacturers Association (PAMA) has condemned the IMF’s proposals, cautioning that lower tariffs would weaken the local automobile sector, which employs more than 3 million individuals. PAMA Director General Abdul Waheed Khan posited that global manufacturers such as Toyota and Honda won’t be supportive of competition from cars made in Pakistan.
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He also cautioned that reducing tariffs would lower foreign exchange reserves and reduce government revenue from taxes since the automobile industry is a major contributor to the national coffers.
Mixed reactions from experts
Auto analyst Mashhood Ali Khan admitted that lower tariffs might result in cheaper car prices as there would be more competition. He gave the example of how the flood of Chinese bikes in the mid-2000s caused prices to fall and a market boom.
However, Khan also warned that only a limited segment of the population would benefit—those already able to afford cars. He stated that the local industry is not yet ready to compete globally and that the reforms may result in a higher trade deficit due to increased imports.
Used cars: cheaper options ahead?
Used car imports are one of the only places where the government gets customs revenue in U.S. dollars, says H.M. Shehzad, chairman of the All Pakistan Motor Dealers Association. It was pointed out that reducing the import age to five years and cutting duties could bring down prices sharply.
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For example, a three-year-old imported vehicle like Daihatsu Mira is priced at approximately $5,000, whereas the same five-year-old model is available at $2,500—potentially saving more than PKR 750,000 per unit, excluding additional discounts based on reduced tariffs.
While the IMF’s efforts in liberalizing import of cars can make cars cheaper and more affordable for consumers, it is also likely to endanger the local auto industry and taxation revenues.
