Pakistan allows used cars to import to warn car manufacturers of “devastating” impacts
Karachi: Pakistan's top economic decision-making body on Wednesday approved the import of second-hand cars, drawing sharp criticism from industry stakeholders, warning that the move would have a “devastating” effect on the country's local manufacturing industry.
The decision came after a meeting of the Economic Coordination Committee (ECC), effectively chaired by New York's Finance Minister Muhammad Auranzeb. The ECC initially said that only vehicles that have not been in the 5-year or longer will be permitted to import until June 30th. The age limit will then be removed.
The decision comes the night before the IMF mission arrived in Pakistan for a second review of the country's economy under the $7 billion loan program. Global lenders require Islamabad to liberalize trade and lift restrictions on second-hand cars imports, among various other provisions.
“The ECC has reviewed a summary on the commercial import of used cars and after detailed discussion, it has given approval of the proposal,” a statement from the Ministry of Finance said.
The ECC said it has approved a change to the import policy order to allow commercial imports of used cars, subject to strict compliance with environmental and safety standards.
The committee approved the imposition of a 40% regulatory obligation (RD) in addition to existing duties on imports of vehicles under five years.
Additional obligations will continue until June 2026, and continue to decline by 10% points each year to zero by fiscal year 2029-30, the statement added.
“Devastating impact”
Pakistani automakers, assemblers and part-makers, including Toyota, Honda, Suzuki, Hyundai, Kia Motors and Changtan cars, fear that the move will cause serious losses to businesses and ultimately lead to the closure of manufacturing plants.
“It's a major fundamental change in the country's import policy,” Abdul Waheed Khan, director of the Pakistan Auto Manufacturers Association (PAMA), told Arab News.
“Not only for a 40% extra charge, it will flood the market with second-hand cars and destroy local production,” he pointed out.
Pakistan's dollar shortage and resulting inventory losses have resulted in production from 226,433 units in 2025 to 226,433 units, with production volume dropping to 51% in 3022, and PAMA data shows production volume dropping to 111,402 units.
The Pakistan Auto Parts & Accessories Manufacturers Association (PAAPAM) said it was “very worried” about the ECC's decision.
“It will have a devastating impact on the industry that provides direct employment to 300,000 people, and indirectly give employment to 183 million Pakistanis,” Shelia Kadir, senior vice president of the association, told Arab News.
Paapam fears the closure of 1,200 companies that manufacture and supply all 13 auto assemblers in Pakistan.
“This will have a negative impact on domestic localization and future investments in electric vehicle gatherings,” he warned.
The association said it would “wait the conditions and grounds behind this decision.”
Shankar Talreja of Topline Securities Analyst said low-end cars and hatchbacks dominate the import of used cars in Pakistan.
“this [approval] Currently, cars are imported using luggage or gift schemes, so there is a possibility that second-hand cars imports will increase.
Analysts said the decline in Pakistan's foreign exchange reserve, which last week at $14 billion, will be tense as second-hand car imports rise.
“() Preparation will be used for this decision,” Taleha said.
However, he said that the government is imposing several qualitative/non-tariff barriers, which would provide some rest for the carmakers and Pakistan's foreign exchange reserves.
However, Khan has not seen a break in the automotive manufacturing industry.
“Importing one vehicle means loss of one vehicle on the production line,” he said. “They are rivals.”
