President of All Pakistan Motor Dealers Association (APMDA), Haji Muhammad Shehzad, expects the upcoming federal budget to provide great relief for used car buyers, including reduced import duties and an increase in the age limit for used cars from the current three years to five years.
Speaking solely to Express newsShehzad said this step is expected in accordance with Pakistan’s obligations under its agreement with the International Monetary Fund (IMF), where the country agreed to gradually ease restrictions on car imports.
He said Pakistan has assured the IMF that it will reduce the heavy tasks and taxes on used cars over the next five years. These cuts come either through lower VAT or revised customs, according to Shehzad.
Currently, the total tasks on imported vehicles vary from 96% to as high as 475%, but these are gradually reduced by 20% annually over the next five years, he explained.
Read more: IMF claps 11 new conditions on Pakistan
Customs cuts, followed by an increase in the age limit for used cars to five years from three years, can slow down the sale of locally manufactured vehicles.
Used cars arriving under different schemes will further make deeper interventions as cuts in tariffs on new and used vehicles will reduce the prices of these vehicles.
The APMDA chairman also claimed that allowing the import of five-year-old cars, especially on a commercial basis, could significantly lower the prices of the vehicle.
He noted that a five -year -old Japanese car costs almost half as much as a three -year -old model.
For example, if a three -year -old vehicle is priced at $ 8,000, a five -year -old equivalent could be purchased for $ 3,500 to $ 4,000. This can be translated into a price drop of Rs 500,000 to Rs 1 million.
Shehzad said that if the proposed changes go through, the price of small cars could get past as much as Rs 1 million.
He claimed that the cheapest local total car is currently priced at DKK 3.1 million. Rs, while a comparable model in a neighboring country costs only 375,000 Rs.
“Even after adjusting for the exchange rate, this car would cost around Rs 1.3 million here,” he said. With reduced tasks and a casual age limit, he added Japanese cars better quality could be made available to Pakistani buyers for under RS 2 million.
He also said that if the government fully complies with IMF conditions, used car imports in the next financial year could rise to 70,000-80,000 units, from the current 30,000. This increase could also significantly increase public revenue by as much as 70%, he estimated.
According to Shehzad, the proposed reforms would not only make cars more affordable to the public, but also challenge the monopoly of local collectors.
This can push them to improve quality and move toward full scale manufacturing. “There has been no real location in Pakistan. We are still dependent on CKD sets.
If the competition is introduced, local collectors will be forced to improve. Removing tasks and facilitating age limits for imports will drive market competition and ultimately strengthen the local automotive industry, ”he said.
Shehzad concluded by saying that if the IMF’s proposal is incorporated into the budget, it could prove to be a large and positive step for Pakistan’s autospector, the public and the government.
“People want access to cars of affordable prices, high quality, the government will generate revenue, and local collectors will have to upgrade to international standards.”
As discussions about structural reforms in Pakistan’s autosect are gaining momentum, the most important stakeholders in the industry have weighed on the proposed political changes associated with the IMF’s broader financial recommendations and the upcoming national customs policy 2025-30.
Car sector consultant Shafiq Ahmed Shaikh considers the IMF’s growing interest in the automotive industry as a positive development, noting that it could help bring long -term solutions to the sector’s challenges.
“It is a sensitive point to be discussed with the automotive industry and other stakeholders for long -term and acceptable solutions,” he said. “As we know are electric vehicles (EV’s) the future, which mainly comes from China, so it is the right time that sustainable and long -term policies and incentives for EVs and their accessories are introduced to better investment and more jobs.”
Read more: Govt reveals big customs reforms
PAAPAM differs by approach
On the other hand, Shehryar Qadir, Senior Vice President of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) and CEO of Jin Kwang Jaz Limited, expressed serious concern over reports that the government can reduce pointed customs duties on completely built units (CBUS) to 15% and bring duties on completely down (CKD) KKD) kit) -Pounties at Lave, like 2030, as as the par with the sparer of Sparice 2025–30.
Read more: Auto Parts Makers Decry New Tariff Policy
While the proposal is placed as a structural reform to increase export-led growth and meet the IMF liberalization targets, critics-inclusive PAAPAM-be necessary to lead to de-industrialization and undermin decades of local investments in the automotive industry.
Shehryar warned that such a movement would weaken the competitiveness of the domestic parts producers and potentially push them out of their market.
A similar concern was repeated by Mashood Ali Khan, who highlighted the risks of the competitiveness of local parts producers.
Meanwhile, Indus Motor CEO Ali Asghar Jamali has also called on to revise the financing limit from RS3 million to 70% of a vehicle’s retail price and extend the financing period from three years to seven years.
It is good to encourage overseas Pakistanis to buy locally manufactured vehicles by offering tax and duty exemptions, provided that payments are made via accounts with foreign currency. This will help change demand away from used car imports.
He emphasized the need to offer tax and customs fractures to vehicle exporters to ensure competitive international pricing.
In addition, there is a need to sign free trade agreements and preferential trade agreements to improve global competitiveness and market affliction for Pakistani vehicles.
As for cars used, the import of such cars should be limited as it negatively affects economic growth, promotes tax evasion and fuel. Pakistan has an annual production capacity of 500,000 passenger cars, 76% of which remain under -utilized.
There is an urgent need to hold an appropriate customs difference between completely knocked down (CKD) and completely built (CBU) units to incentive local assembly, promote job creation and support economic growth.
The government should develop a consistent and stable political framework for the automotive industry to ensure long -term growth and avoid frequent political changes.
This includes the formulation of a comprehensive policy for promoting the establishment of local industries for essential raw materials such as steel, resin, aluminum and copper, which are critical components of high value goods.
For example, India’s steel policy has enabled it to become a net exporter of steel.
Jamali asked to rationalize the tax structure for locally manufactured vehicles to create equal conditions with the imported used cars.
He also called for adjusting the depreciation rate of the imported used cars from 1% to 0.5% to improve the tax revenue for the government.
Last week, stakeholders in the automotive industry met with special assistant to the Prime Minister of Industry, Haroon Akhtar Khan, to discuss customs related concerns.
Although car manufacturers have committed to previous policies to fully locate car parts production through a 100% deletion program, progress has been slow, with most parts still importing.
Read more: Auto parts manufacturers fear the development
Haroon assured the participants that industry concerns, especially with regard to the proposed 15%duty, would be taken up with the Customs Policy Board.
He emphasized the government’s obligation to support domestic industries and instructed PAAPAM to submit a comprehensive analysis that outlines the level of customs protection required to ensure competitiveness and sustainability.
He repeated Prime Minister Shahbaz Sharif’s attitude that industries showing increased productivity would be entitled to incentives aimed at increasing growth and performance in the sector.
While recognizing the car parts, such as producers’ concerns, encouraged them to place their confidence in the prime minister’s leadership and ensure that their interests would be represented.
PAAPAM was also asked to provide brief follow -up reports prior to the next meeting to maintain momentum and secure ongoing dialogue on customs related questions.
