Govt imposes 40% tariff on used car imports

The government has announced that a 40% tariff will be applied on used car imports from next month. The move is designed to protect local car manufacturers, but it also means consumers will not see immediate relief in car prices.

New Import Rules

During a Senate committee session, Joint Secretary Trade Policy Mohammad Ashfaq explained the changes:

• Accidental and low-quality vehicles will not be allowed.

• Under the IMF programme, Pakistan must gradually open the market for used cars.

• From September 2025, commercial imports of cars up to five years old will be allowed.

• By July 2026, all age limits and restrictions will be removed.

• The 40% tariff on used cars will be reduced step by step and reach zero within four years.

• Cars up to eight years old will eventually be permitted, but with safety and environmental standards.

At present, most imported cars enter Pakistan under the gift, baggage, and transfer of residence schemes, and these cover nearly 25% of local demand. Many buyers prefer imports because of better quality and features compared to locally made cars.

Wider Tariff Cuts

Pakistan has also committed to cutting overall import tariffs from 20.2% to 9.7% over five years. In FY26, the rate will fall to 15.7% by reducing different duties. High customs duties on auto sector products (currently 35%) will be phased out after July 2026.

Local Industry’s Concerns

Local car makers strongly opposed the new policy.

• Indus Motors CEO Ali Asghar Jamali said high car prices are mainly due to heavy government taxes, not manufacturers. He noted:

  • Taxes make up 30% of small car prices.

  • For SUVs like the Fortuner, taxes account for 61% of the price.

• Jamali also claimed it is not the private sector’s duty to create jobs, a statement that drew criticism from senators.

• A Pak-Suzuki representative added that making cars locally has become so costly that imports are now more practical than local production.

Push for Competition and Safety

While many industry leaders resisted, Senator Qadir supported the change, saying reduced protection would increase competition and improve standards. Lawmakers also criticised local assemblers for offering only two airbags in most cars, while imported vehicles often come with six airbags, even though local manufacturers claim their cars have the same quality.

What This Means for Consumers

For now, the 40% tariff keeps imported cars expensive, but over the next few years, tariffs will fall, and more choices will enter the market. This could push local assemblers to improve quality, safety, and features—something car buyers in Pakistan have long demanded.

Read More: Islamabad to Become ‘Free Wi-Fi City’ with 30 Public Spots in First Phase