Auto Industry to Benefit from Tariff Reforms, Says Report
Vehicle prices in Pakistan may finally see a downward trend, thanks to the government’s new tariff reforms. According to a study released by the Pakistan Institute of Development Economics (PIDE), an affiliate of the Planning Commission, easing taxes on imported vehicles could make cars more affordable for the public after years of escalating prices driven by high tariffs and rising production costs.
Reforms That Promise Relief
The study outlines a series of tariff adjustments aimed at reducing costs for buyers. Import duties on Completely Built-Up Units (CBUs) will be reduced from 20% to 15% over five years.
For used vehicles, tariffs will initially carry a 40 percent surcharge above new car rates in FY26. However, this surcharge will decline by 10 percent annually until it reaches parity by 2030.
Alongside these tariff cuts, the government also plans to abolish exemptions under the “Fifth Schedule” and dismantle protectionist regulatory hurdles that have long shaped the auto market. Together, these reforms are expected to reduce vehicle prices and improve accessibility for middle-class buyers
What It Means for Consumers
For consumers, the changes could bring long-awaited relief. Lower tariffs are projected to:
- Boost affordability, allowing more households to purchase cars.
- Expand choices as a wider variety of vehicles enter the market.
- Improve quality by encouraging local manufacturers to raise their standards in response to competition.
The study suggests that increased demand could also drive broader growth in the automotive sector, encouraging investment and expanding vehicle ownership nationwide.
Concerns from Local Manufacturers
Yet, the reforms have sparked unease among domestic Original Equipment Manufacturers (OEMs). Industry insiders warn that the liberalized import regime may trigger a surge of 70,000 to 80,000 used-car imports annually.
Such an influx, they argue, could undermine local production, disrupt the gradual progress made in localization, and jeopardize employment.
For some firms, heightened competition may mean restructuring or even shutting down operations. For others, however, it could be the push needed to innovate and stay competitive in a rapidly evolving marketplace.
Environmental Goals in Focus
The tariff changes are not just about affordability—they also support Pakistan’s broader environmental commitments. The government plans to introduce a carbon levy and offer incentives for electric vehicles (EVs), aiming to achieve a 30 percent EV penetration among new sales by 2030.
A proposed petrol-diesel levy, expected to generate Rs. 25–30 billion annually over five years, will provide funding for EV infrastructure development. This dual approach—reducing conventional car tariffs while incentivizing EVs—signals an apparent policy shift toward cleaner mobility.
A Shift in the Industry Mindset
For more than two decades, Pakistan’s automobile industry has operated behind protective tariff walls, with demand shaped by booking systems and limited consumer choice. High tariffs, combined with an unfavorable exchange rate, have been the primary drivers of rising car prices.
Now, local manufacturers are being asked to step out of this protective shield and compete with global players. While their concerns about job losses and shrinking investment are real, critics argue that resistance may stem from a reluctance to embrace long-overdue competition.
The Road Ahead
The PIDE study makes it clear that tariff reforms will have a complex impact. On one hand, they promise affordability, consumer choice, and a greener future. On the other hand, they challenge the survival of local players, who must adapt or risk becoming obsolete.
The likely outcomes can be grouped into four key areas:
- Increased Competition – raising the stakes for local assemblers.
- Tariff-Induced Cost Reductions – lowering vehicle prices.
- Improved Affordability – Making Car Ownership More Accessible.
- Labor Market Shifts – with potential risks to jobs but also scope for new opportunities.
Pakistan’s automobile market stands at a defining moment. For consumers, the reforms signal a new era of affordability, variety, and quality.
For manufacturers, they represent a challenge to break away from decades of protectionism and embrace global standards. For policymakers, it is a balancing act—ensuring that affordability and environmental goals do not come at the cost of domestic industry collapse.