As the 2025-26 budget approaches, the auto industry in Pakistan is bracing for significant changes that could transform the way people buy and own cars. One of the most talked-about developments is the potential reduction in car prices, thanks to proposed changes in the government’s auto policy. These changes aim to offer consumers more affordable options while making the car market more competitive and diverse.
Proposed Changes to Vehicle Age Limits
A key aspect of the upcoming budget is the proposal to extend the age limit for importing used vehicles from three to five years. Currently, the import of used passenger cars is limited to those no older than three years, while big jeeps (SUVs) can be imported if they are under five years old. This creates a disparity between vehicle categories and limits the variety of cars available to consumers in the local market.
The proposed revision seeks to standardize the age limit across all vehicle categories, which could significantly expand the selection of used vehicles in Pakistan. This would mean more affordable options for consumers, as vehicles aged between three to five years are often in excellent condition and come at a lower price point than brand-new cars.
Changes in Tariff Structures
Along with revising the age limit for imported vehicles, the government is also reviewing the tariff structures for Completely Built-Up (CBU) vehicles. Currently, regulatory duties and tariffs can make importing new cars quite expensive, driving up prices for Pakistani consumers. The government is considering a gradual phase-out of these duties, with a goal of reducing tariffs to below 10% in the long run. This would bring overall auto-sector tariffs down to single digits over the next five years, which could make new cars more affordable in the future.
Impact on the Used Car Market
The proposed changes could have a significant impact on the used car market in Pakistan. By allowing the import of five-year-old vehicles and reducing tariffs on imported cars, the Pakistani government aims to make cars more accessible to a wider range of people. Additionally, these changes could lead to a more diverse range of vehicles being available in the market, offering consumers a better selection to choose from based on their needs and preferences.
Currently, the used car market is dominated by vehicles like the Suzuki Every, Toyota Vitz, Daihatsu Mira, Toyota Prius, Honda Vezel, and Toyota Aqua. These imported vehicles, with price ranges varying from 15 lac+, are popular among Pakistani buyers due to their affordability and variety. With the proposed policy changes, these models, along with many others, could become more readily available and even more affordable as the tariffs come down and the age limit is extended.
Controls to Prevent Misuse of Import Schemes
To ensure that the import of used vehicles is regulated fairly, the Federal Board of Revenue (FBR) has implemented stricter controls to prevent the misuse of schemes like personal baggage, transfer of residence, and gift schemes. These schemes were previously exploited, leading to the importation of more cars than intended. Under the new Import Policy Order (IPO) 2022, only overseas Pakistanis who have not imported, gifted, or received a vehicle in the past two years are eligible to use these schemes.
Furthermore, FBR has clarified taxation rules for the auction of used cars. Serviceable used vehicles will not be subject to an additional 18% sales tax if the tax has already been paid at the time of import or local purchase. However, condemned or unserviceable cars will still be taxed at auction, regardless of any prior payments.
Looking Ahead: Affordable Cars for Pakistani Consumers
If the proposed policy changes are approved, car buyers in Pakistan could see more affordable options in the market, especially in the used car segment. With the extension of the import age limit and the reduction in tariffs, consumers would have access to a wider range of vehicles, both new and used, without the burden of high taxes and import duties. This could drive competition in the local market, pushing local manufacturers to offer better deals and more diverse models.
