The federal government is targeting an ambitious FBR tax collection of PKR 15.26 trillion (a massive 17.6% year-on-year jump). To meet these aggressive goals aligned with IMF stabilization demands, the axe has officially dropped on the luxury automobile segment.
Federal Excise Duty (FED) on high-end imported vehicles is skyrocketing, with proposed rates of 40% and 41% for large engine capacities i.e., 2000cc to 3000cc and beyond .
The New FED Slabs: Breaking Down the Numbers
According to the official text of the proposed Finance Bill, the government has created explicit brackets targeting imported motor cars, station wagons, SUVs, and double-cabin 4×4 pickups.
Under the newly proposed Heading 87.03, the luxury imported segment is being slapped with two distinct, heavy-duty FED tiers:
- 40% FED on imported vehicles with 2000 cc to 3000 cc engine capacity.
- 41% FED on imported vehicles with 3000 cc+ engine capacity.
Furthermore, the bill introduces value-based taxation metrics. Imported vehicles with an invoice value exceeding PKR 20 million up to PKR 30 million will attract a 30% duty, while anything crossing the PKR 30 million threshold gets slapped with a 40% duty.
Proposed Car Taxation At A Glance
| Vehicle Type / Tier | Proposed Policy / Duty |
| Imported 2000cc to 3000cc | 40% FED |
| Imported Exceeding 3000cc | 41% FED |
| Imported Value PKR 20m – PKR 30m | 30% Duty |
| Imported Value Exceeding PKR 30m | 40% Duty |
| Electric Vehicles (4-Wheelers) | 1% Sales Tax (Extended till June 2027) |
The Silver Lining Stays Intact for EVs
However, it’s not all bad news, at least not for EV enthusiasts. The government has explicitly carved out an exemption window for four-wheeled electric vehicles (EVs).
Introducing The Sunset Clause Extension*
The concessionary 1% sales tax and the customs duty exemptions on EV Completely Knocked Down (CKD) kits are officially locked in till the 30th day of June, 2027.
This extension is a massive relief for clean-energy adopters and local assemblers, ensuring that luxury EVs remain an attractive and accessible option while internal-combustion heavyweights take a hit.
*A sunset clause extension lengthens the expiration date of a contract or legislative provision.
Where Does the Local vs. Imported Cars Debate Stand Now?
According to a detailed budget analysis by KTrade Research, the financial impact of this move is firmly categorized as Neutral for the broader local automotive industry but highly disruptive for the premium tier.
As KTrade analysts correctly point out, this massive surge by the FED targets the ultra-premium automobile market. The primary consequence of this policy will be a drastic widening of the price differential between imported vehicles and locally assembled ones.
As imported Land Cruisers, Prados, and high-end German sedans become financially out of reach for many, local giants like Indus Motor Company (Toyota Pakistan) find themselves in a relatively insulated position.
Buyers seeking utility or status may move away from high-duty CBUs toward locally manufactured top-tier options, helping keep local scrap values and assembly lines steady.
PakWheels Thoughts
There is no sugarcoating it: the era of relatively accessible premium imports is seemingly coming to an end. The government’s pivot toward domestic taxation means that CBU imports are being treated as the ultimate cash cow. While it protects the local industry to some extent and gives the go-ahead to local EV assembly, the massive 40% and 41% FED brackets will effectively price out a significant number of classic SUV and sports car enthusiasts.
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