ISLAMABAD: Imports of used cars under the gift scheme have continued despite tough government restrictions, with more than 2,000 units arriving in the country during October, auto vendors said.
The vehicles are imported through payments to Japanese auction houses via hawala channels and sold domestically through unregulated cash transactions, according to reports. Traders have found a way around the restrictions, and domestic component manufacturers are the net losers, vendors said.
Several locally assembled vehicles use 1.5 million to 2.5 million rupees’ worth of domestically made parts produced by 1,200 manufacturers.
Imports of new vehicles also have been rising. Imports of completely built-up units, including new and used cars, surged 40% to $126 million during the first quarter of fiscal year 2026-27, from $90 million in the same period a year earlier, according to the Pakistan Bureau of Statistics. New entrants are importing CBUs to test consumer response before beginning local assembly.
Vendors also are unhappy with the new auto policy announced by the government last week, which they believe will damage local component manufacturing by 1,200 engineering enterprises.
PAAPAM Chairman Abdul Rehman Aizaz said the policy would lead to a significant outflow of dollars through imports of CBU electric vehicles and 100% completely knocked-down kits for local assembly.
“It will also create a gap in FBR revenues with 5% CBU duties on small EVs and especially low sales tax rates on EVs. Finally, it will facilitate used cars through commercial imports,” he said.
Aizaz said consumers — the 0.1% of Pakistanis who buy cars every year — might see a 5-7% reduction in prices due to tax cuts. The biggest losers, he said, would be 1,200 domestic component manufacturing companies, their 300,000 direct employees and 1.5 million Pakistanis indirectly associated with the industry.
Assemblers would find it more feasible to import parts from foreign partners instead of buying them locally, resulting in a rollback of localization, he said. Other losers would be the State Bank, which would face a shortage of dollars to finance additional imports, and the FBR, which would suffer a significant shortfall in tax collection.
Component manufacturers disowned the policy, saying it was completely contrary to what had been agreed with the Ministry of Industries during consultations held until June 2026. Aizaz said the policy changed drastically between June and November, favoring imports over local manufacturing.
The component industry also considers the National Tariff Policy flawed and based on an incorrect comparison of tariffs with other countries in the region.
“Applying the NTP to the auto sector is completely against regional peers, as India, Thailand and Indonesia apply CBU tariffs of 120%, 80% and 52%, respectively, compared with the 15% proposed in the auto policy,” Aizaz said.
