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The government has decided that accidental and low-quality used vehicles will not be allowed into Pakistan. In addition, a 40% tariff will be imposed on the commercial import of used vehicles beginning next month. Officials say the policy is meant to shield the local auto industry from sudden competition as Pakistan gradually opens its trade regime under commitments with the International Monetary Fund (IMF).
However, the decision dampens consumer hopes for cheaper cars. For now, vehicle prices will remain high, as local assemblers argue that existing government taxation — ranging between 30% and 61% of retail prices — already keeps cars out of reach for many buyers.
Policy Announcement in Senate Committee
The new policy was announced during a joint meeting of the Senate Standing Committees on Finance and Industry.
Mohammad Ashfaq, Joint Secretary for Trade Policy, told lawmakers that Pakistan had assured the IMF of additional tariff protection, equal to 40% of the price of new cars.
Ashfaq further said that the government has yet to decide whether to continue with current import schemes, including transfer of residence, baggage, and gift schemes. These schemes, which are often used to bring in mildly accidental vehicles, currently account for nearly one-fourth of market demand.
IMF Conditions Drive Liberalisation
Under the $7 billion IMF bailout, Pakistan is bound to gradually liberalise its auto sector. From September 2025, commercial imports of used vehicles up to five years old will be permitted. By July 2026, both age and quality restrictions are set to be lifted.
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Over the next four years, the additional 40% tariff will be phased out, paving the way for imports of six- to eight-year-old vehicles. Authorities have also pledged to introduce environmental standards to ensure that older imports do not add to pollution risks.
Broader Tariff Cuts Under IMF Deal
The IMF programme also requires Pakistan to slash its overall tariff regime by half in five years.
- The current average tariff of 20.2% will fall to 9.7%.
- In FY26, average tariffs will be cut to 15.7%, a 22.3% reduction.
- Customs duty will be brought down to 11.2%, additional customs duty to 1.8%, and regulatory duty to 2.7%.
Additional duties will be phased out in four years, regulatory duties in five, and exemptions eliminated during the same period. The structure will be simplified to just four slabs, with a maximum of 15%.
Auto Industry Pushes Back
The Pakistan Automotive Manufacturers Association (PAMA) and the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) have both raised objections to the IMF-driven changes. They have warned the Senate committee that liberalisation could severely damage local manufacturing, which currently enjoys customs protections as high as 35%.
These protections will begin to phase out starting July 1, 2026. Both associations have intensified lobbying efforts to safeguard local industry, even as the IMF insists on a freer market.
Consumers Still Stuck in the Middle
Analysts believe the government is trying to balance IMF requirements with pressure from local assemblers, but consumers remain the biggest losers. With the import ban on accidental cars and a fresh 40% tariff on used vehicles, car buyers are unlikely to see lower prices in the near future.
For now, Pakistan’s auto sector sits at a crossroads:
- Local assemblers want to hold on to decades-old protections.
- The IMF demands liberalisation and tariff cuts.
- Consumers continue to pay some of the highest car prices in the region, with limited choice.
