The government has announced that accidental and low-quality used cars will not be allowed into Pakistan, while a hefty 40% tariff will be imposed on commercial imports of used vehicles starting next month, a move officials say is aimed at protecting the local auto industry.
The decision, however, means consumers will not see any immediate relief in car prices from the upcoming trade liberalisation, as local assemblers maintain that high government taxation, ranging from 30% to as much as 61% of the retail price, already keeps vehicles expensive in Pakistan.
The policy announcement was made on Monday during a joint meeting of the Senate Standing Committees on Finance and Industry. Joint Secretary for Trade Policy Mohammad Ashfaq told lawmakers that the government, under commitments made with the International Monetary Fund (IMF), will enforce additional tariff protection equivalent to 40% of the price of new cars.
Ashfaq said the government has yet to decide whether to continue with existing import schemes, such as transfer of residence, baggage, and gift, once commercial imports are formally allowed. At present, commercial imports are banned, and nearly one-fourth of market demand is met through vehicles brought in under these schemes, often mildly accidental but preferred by consumers over locally produced options.
As part of its $7 billion IMF bailout, Pakistan has agreed to gradually open the auto sector to imports. From September, commercial imports of used vehicles up to five years old will be permitted, with all age and quality restrictions slated to be lifted by July next year.
Over the next four years, the additional 40% tariff will be reduced to zero, paving the way for imports of six- to eight-year-old vehicles. Standards, however, will be introduced to minimise environmental risks, officials said.
Pakistan is also obligated under the IMF programme to slash its overall tariff regime from the current average of 20.2% to 9.7% within five years, a 52% reduction. In the first year (FY26), the average tariff will fall to 15.7%, a 22.3% cut in protection. This will be achieved by reducing customs duty to 11.2%, additional customs duty to 1.8%, and regulatory duty to 2.7%.
Additional customs duties are to be phased out in four years, regulatory duties in five, and exemptions eliminated within the same timeframe. The tariff structure will be simplified to just four slabs, with a maximum rate of 15%.
The Pakistan Automotive Manufacturers Association (PAMA) and the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) have launched a lobbying effort against the IMF-driven policy changes. Both groups have made representations to the Senate committee, warning that liberalization could undermine local industry.
Currently, auto sector products fall under the Auto Policy with customs duties as high as 35%. These protections will begin to phase out on July 1, 2026.
Analysts say the policy reflects Islamabad’s balancing act between IMF conditionalities and pressures from the local auto lobby, leaving consumers caught in the middle. For now, the import ban on accidental cars and the new 40% tariff mean vehicle prices are unlikely to come down anytime soon.