The government has issued a circular according to which the used cars that enter Pakistan would be levied with an import duty of 40 percent beginning next month, whereas damaged cars and junk cars will not be allowed. Officials note the move is intended to protect local auto industry, but this implies that the market is likely to experience no price relief any time soon.
Speaking at a joint meeting of Senate Standing Committee on Finance and industry, Trade Policy Joint Secretary Mohammad Ashfaq explained that, according to the commitments to International Monetary Fund (IMF), Pakistan was required to offer tariff mainly equivalent to 40 percent of the price of brand new cars. The government is still debating whether to continue schemes such as one and transfer residence, baggage and gift which presently fulfils almost a fourth of the demand.
Importation of previously used vehicles of up to five years of age shall start in September with the importation restrictions being fully removed by July 2026. Under the new framework, the 40% tax will be phased out over four years in a move that will ultimately allow imports of different aged vehicles of between six to eight years under more stringent environment codes.
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Pakistan has also committed to reducing its average tariff regime to 9.7 percent on a five-year period, reducing customs and regulatory as well as other duties. Industries such as the PAMA and PAAPAM are lobbying hard to resist liberalisation claiming that local manufacturing would be threatened as a result.
In the short term, the prohibition of accidented cars along with the 40% duty on importation of used cars implies that affordability of vehicles in Pakistan will not be improved in the near future.
