The president of the All Pakistan Motor Association Distributors (APMDA), Haji Muhammad Shehzad, hopes that the next federal budget will offer a great relief for users of used cars, including reduced import rights and an increase in the age limit for used cars of the current three years to five years.
Speaking exclusively to Express newsShehzad said that this movement is anticipated in line with Pakistan’s commitments under his agreement with the International Monetary Fund (IMF), in which the country agreed to gradually relieve restrictions on car imports.
He said that Pakistan has assured the IMF that he will reduce heavy tariffs and taxes on cars used in the next five years. These cuts will come through the lowest sales tax or the revised customs tariffs, according to Shehzad.
Currently, total tariffs in imported vehicles vary from 96% to 475%, but these will be gradually reduced by 20% per year in the next five years, he explained.
Read more: IMF slapped 11 new conditions in Pakistan
Tariff cuts, followed by an increase in the age limit of five -year used cars from three years, can stop sales of locally manufactured vehicles.
The used cars that arrive under several schemes will make even deeper, since the cuts in rates in new and used vehicles will reduce the prices of these vehicles.
The president of the APMDA also said that allowing the import of five -year -old cars, particularly on a commercial basis, could significantly reduce vehicle prices.
He pointed out that a five -year -old Japanese car costs almost half a three -year model.
For example, if a three -year -old vehicle is priced at $ 8,000, an equivalent of five years could be purchased for $ 3,500 to $ 4,000. This could translate into a price drop from RS 500,000 to RS 1 million.
Shehzad said that if the proposed changes are made, the price of small cars could fall up to RS 1 million.
He affirmed that the cheapest assembled car locally has a price currently 3.1 million, while a comparable model in a neighboring country costs only RS 375,000.
“Even after adjusting the exchange rate, that car would cost around RS 1.3 million here,” he said. With reduced tasks and a relaxed age limit, he added, they could be made available to Japanese cars of better quality for Pakistani buyers for less than 2 million rupees.
In addition, he declared that if the government adheres completely to the IMF conditions, the imports of cars used in the next fiscal year could increase to 70,000–80,000 units, above the current 30,000. This increase could also significantly boost government income by up to 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 assemblies.
This could push them to improve quality and move towards large -scale manufacturing. “There has not been a real location in Pakistan. We still trust ERC kits.
If the competition is introduced, local assemblies will be forced to improve. Eliminating tariffs and ease of age limits in imports will boost market competition and, ultimately, strengthen the local automotive industry, ”he said.
Shehzad concluded by saying that if the proposals of the IMF are incorporated into the budget, it could be an important and positive step for the automotive sector of Pakistan, the public and the government equally.
“People will have access to affordable and high quality vehicles, the government will generate income and local assemblies must be updated to international standards.”
As discussions on structural reforms in the automotive sector of Pakistan obtain impulse, the key stakeholders of the industry have intervened in the changes of proposed policies linked to the largest economic recommendations of the IMF and the next 2025–30 national tariff policy.
The SHAFIQ AhFiq Ahfiq Automobile Sector consultant sees the growing interest of the IMF in the automotive industry as a positive development, and points out that it could help provide long -term solutions to the challenges of the sector.
“It is a sensitive point, which must be discussed with the automotive industry and other interested parties for long -term and acceptable solutions,” he said. “As we know, electric vehicles (EV) are the future, which will come mainly from China, so it is the right time that sustainable policies and incentives are already introduced for long term for electric vehicles and their accessories to obtain better investments and more jobs.”
Read more: the government presents important tariff reforms
Paapam differs in the approach
On the other hand, Shehryar Qadir, Senior Vice Chairman of the Pakistan Association of Automotive Parts and Accessorsk BUILT UNITS (CBUS) TO 15% AND BRING DUTIES ON COMPLETELY KNOCKED DOWN (CKD) Kits Even Lower By 2030, AS Part of the National Tariff Policy 2025–30.
Read more: Autopartes manufacturers denounce a new rate policy
While the proposal is positioned as a structural reform to boost export -led growth and meet the IMF liberalization objectives, critics, including Paapam, that it could lead to deindustrialization and undermine local investment decades in the automotive industry.
Shehryar warned that such a movement would severely weaken the competitiveness of national pieces manufacturers, which could get them out of their market.
Maskood Ali Khan echoed a similar concern, highlighting the risks for the competitiveness of local parts manufacturers.
Meanwhile, the CEO of Indus Motor, Ali Asghar Jamali, has also asked to review the financing limit of RS3 million to 70% of the retail price of a vehicle and extend the financing tenure from three years to seven years.
It is good to encourage Pakistani abroad to buy locally made vehicles by offering tax and tax exemptions, provided that payments are made through foreign monetary accounts. This will help change the demand for used imports.
He emphasized the need to offer taxes and taxes for vehicle exporters to guarantee competitive international prices.
In addition, it is necessary to sign free trade agreements and preferential trade agreements to improve global competitiveness and market accessibility for Pakistani vehicles.
With regard to used cars, the importation of such cars must be restricted, since it negatively affects economic growth, encourages tax evasion and feeds the gray market. Pakistan has an annual manufacturing capacity of 500,000 passenger vehicles, of which 76% remain underutilized.
There is an urgent need to maintain an adequate tariff difference between the completely demolished units (ERC) and completely constructed (CBU) to encourage the local assembly, promote employment creation and support economic growth.
The Government must develop a consistent and stable policy framework for the automotive sector to guarantee long -term growth and avoid frequent changes in policies.
This includes the formulation of a comprehensive policy to promote the establishment of local industries for essential raw materials such as steel, resin, aluminum and copper, which are critical components for high value goods.
For example, India’s steel policy has allowed it to become a net steel exporter.
Jamali begged to rationalize the fiscal structure of locally manufactured vehicles to create a leveling playing field with imported used cars.
He also asked to adjust the depreciation rate for used cars imported from 1% to 0.5% to improve tax revenues for the government.
Last week, the interested parties of the automotive industry met with the special assistant of the Prime Minister of Industries, Haroon Akhtar Khan, to discuss the concerns related to the rates.
Although automobile manufacturers have committed to previous policies to completely locate the production of auto parts through a 100%elimination program, progress has been slow, and most parts are still imported.
Read more: Autopartes manufacturers fear development
Harooon assured the participants that the concerns of the industry, particularly with respect to the proposed customs duty of 15%, would be formally formed with the Tariff Policy Board.
He emphasized the government’s commitment to support national industries and ordered Paapam to present an integral analysis that describes the level of tariff protection required to guarantee competitiveness and sustainability.
He reiterated the position of Prime Minister Shahbaz Sharif that the industries that demonstrated greater productivity would be eligible for incentives, with the aim of increasing growth and performance within the sector.
Although he recognized the concerns of auto parts manufacturers, Haroon encouraged them to trust Prime Minister’s leadership, ensuring that their interests would be firmly represented.
Paapam also received instructions to provide concise monitoring reports before the next meeting to maintain the impulse and guarantee continuous dialogue about the problems related to the rate.
