Want a cheaper ride? Govt allows used car imports, but at a steep price

The Economic Coordination Committee of the federal cabinet has approved the commercial import of used cars, but consumers are unlikely to benefit immediately due to a hefty 40% regulatory duty aimed at protecting local manufacturers.

Under the new policy, only used cars less than five years old can be imported until June 30, 2026. After that, the age restriction will be lifted. The decision was made during a virtual ECC meeting chaired by Finance Minister Muhammad Aurangzeb, according to an official statement from the finance ministry.

Imported vehicles must meet safety and environmental standards, and the 40% regulatory duty will gradually be reduced by 10% each year from 2026, eventually being phased out entirely by the fiscal year 2029–30.

No immediate relief for consumers

Despite the green light for imports, consumers are unlikely to see lower prices. Local car assemblers argue that high taxes — ranging from 30% to 61% of a vehicle’s price — make locally produced cars expensive, and trade liberalisation alone won’t reduce costs.

Currently, commercial imports of cars are not allowed. Cars enter the country through schemes such as transfer of residence, baggage, or gifts, meeting only about a quarter of local demand. Many buyers prefer imported mildly damaged used vehicles over new, costly local models.

IMF conditions

The policy change comes under an understanding with the International Monetary Fund, which requires Pakistan to allow the commercial import of cars up to five years old from September and remove age and other restrictions by July next year.

Over the next four years, the 40% import duty will gradually be reduced to zero, with imports of six- to eight-year-old vehicles also permitted in the future.

Local manufacturers push back

The Pakistan Automotive Manufacturers Association and the Pakistan Association of Automotive Parts and Accessories Manufacturers lobbied against the policy and presented their concerns to Senate committees.

Interestingly, some local manufacturers now see used car imports as more profitable than local production. A representative from Pak-Suzuki Motors, a Japanese national, said producing locally is costly and labor-intensive, making it more appealing to import and sell vehicles instead.