The federal budget has cut import duties on imported vehicles under the National Tariff Policy (NTP), a move made under pressure from the IMF.
The duty cuts have created uncertainty across Pakistan’s local car assembly industry, with key players expressing disappointment over the government’s move.
Customs duty on imported cars has been reduced by up to 50 percent. Additional Customs Duty (ACD) has come down from 6 percent to 4 percent, and Regulatory Duty (RD) has been reduced from 50 percent to 20 percent.
PAAPAM Calls The Cuts “Disappointing”
The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) expressed its disapproval of the tariff cuts.
PAAPAM Vice President Shehryar Qadir said the reduced tariffs put billions of rupees in investment and roughly 1.8 million jobs at risk across assemblers and raw material suppliers, including 350,000 skilled workers at local parts manufacturers.
Qadir also called the move “absolutely ridiculous,” saying no automobile manufacturing country in the world allows duties on CBUs as low as the ones Pakistan has now introduced.
Qadir also said that Pakistan’s market has remained roughly the same size for two decades due to inconsistent policy implementation.
On top of that, CBU duties keep falling, while taxes on locally assembled cars remain the same. Locally assembled cars already carry an 18-25 percent sales tax, along with FED and CVT taxes, and on top of that, the government added an NEV tax last year. He said this heavy tax burden further hurts the local auto industry
Duties On Imported Cars Are Criminally Low
While speaking to PakWheels on the issue, the CFO of a major car company, who requested anonymity, said the new duty structure has made imported cars too competitive and described the tariff cuts as “criminally low.”
The CFO said the reduced duties make it less appealing to assemble cars locally and are pushing locally assembled vehicles into competition with imported vehicles.
He also commented on the recent case of BYD’s import of 2000 vehicles and called it ironic that local hybrid assembly has been halted for 21 days due to sales tax uncertainty, while CBUs have become appealing enough for a manufacturer to import 2,000 units at once.
Auto Expert Questions Government’s Commitment
Auto industry expert Suneel Munj said the tariff cuts stem from years of inconsistent auto policy.
Munj stated that in 2016, the government announced Pakistan’s first auto policy, inviting international carmakers to set up local plants and promising them concessions in return.
New players, including Sazgar, Hyundai, Kia, Changan, MG, Chery, Proton and many others, entered the market on that promise, growing the number of assemblers in Pakistan from 3 to 12.
With CBU imports now nearly as cheap as locally assembled cars, he said, there’s no reason left to invest in a local plant or assemble cars locally. Companies that have already invested billions of rupees are watching their investment lose value.
He also said the local assembly creates jobs that imports cannot. A car import requires nothing more than bringing the vehicle in, while a local plant supports an entire vendor industry that employs hundreds of thousands of people on its own.
In the end, Munj closed by turning the question around.
He said officials keep asking what the auto sector has given the country, but the real question is the reverse: what the government has given the auto sector?
The industry brings jobs, skilled labor, and an engineering mindset, he said, and remains the second-highest taxpayer of any sector, one he believes the government’s current policy is now working to destroy.
Where This Leaves The Industry?
The tariff cuts raise the question of whether the government still wants to promote local manufacturing or follow Australia’s model of relying entirely on imported cars?
If imports were the preferred route, why did the government encourage automakers in 2016 to set up local plants and invest billions in Pakistan?
If the government reverses course now, local assemblers could lose billions in investment, and future investor confidence would also suffer.
All three experts interviewed for this story agree that CBU duties must remain high enough to protect local assemblers and maintain investor confidence.
Car companies will naturally choose the easier and more cost-effective route, which, under the current policy, is to import vehicles rather than assemble them locally.
A recent example is BYD’s shipment of 2,000 vehicles, estimated to be valued at $50–60 million.
If imports cost nearly the same as assembling in Pakistan, existing companies that invested billions in plants and created thousands of jobs will be placed at a disadvantage
If this continues, it is only a matter of time before more manufacturers choose imports like BYD over investing in local assembly, and the government may realize the mistake after factories slow down, jobs are lost, and future investment dries up.
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