The Pakistan Automotive Manufacturers Association (PAMA) has called for imposing a 15% regulatory duty on used imported vehicles below the 1300 CC category to promote the struggling local industry. Analysts and customers have urged Original Equipment Manufacturers (OEMs) and local manufacturers-cum-assemblers to produce low-priced, quality vehicles to discourage the import of used vehicles and promote maximum localisation of the industry.

PAMA Secretary General Abdul Waheed Khan, in a letter to the prime minister and other federal ministers and policymakers, stated, “In order to sustain the growth of the local industry, achieve the targets under Auto Policy 2012-2026, and save the industry from unfair competition from the import of used vehicles (specifically in the below 1300 CC category), we propose that a 15% regulatory duty be imposed on the import of used vehicles below the 1300 CC category, along with maintaining the current rate of 15% regulatory duty on vehicles above the 1300 CC category. The SRO 577 (I) 2005 has since outmoded as it was last updated in 2015, and ever since, taxes are levied on taxable values prevailing then, causing a huge loss to the exchequer. It is time that this SRO is updated to prevailing prices.”

Khan noted that the import of used cars in recent years has grown by 600% compared to the preceding years, while the production and sales of local vehicles have dropped to the lowest levels ever. He expressed hope that the federal budget for 2024-2025 would impose strong measures to contain this illegal trade, which flourishes unfairly using privileges exclusively allowed to overseas Pakistanis under the import policy.

Though a 15% regulatory duty has been imposed on the import of used vehicles through the Finance Act, effective July 1, it applies only to the above 1300 CC category, while the below 1300 CC engine capacity segment has been omitted. Customs import data for January to May 2024 indicates that about 62% of the aggregate import of used cars pertains to the below 1300 CC category.

Auto sector analysts and customers have stressed the need for maximum localisation of the auto industry and advocated for affordable and quality vehicles locally to discourage the import of used cars. In the past, local auto dealers in Pakistan engaged in an illegal selling mechanism called “own-money”—a black-market premium—aimed at swindling and exploiting eager customers when the industry was growing. The automotive industry, including manufacturers-cum-assemblers and OEMs, then raised car prices while observing this trend, instead of benefiting buyers.

Despite skyrocketing inflation, rupee depreciation, and runaway interest rates breaking the back of buyers, resulting in lacklustre sales for over two years, customers continue to complain about own-money on some variants in the market, with dealers exploiting them on the pretext of car shortages. Middle-class customers are unable to purchase cars due to exorbitant prices.

Leading auto sector analyst Muhammad Sabir Hussain said, “Why is the industry taking a heavy toll on the country on the pretext of raising the local industry? If the government gave some relief to overseas Pakistanis about the import of used cars, why is the local auto industry upset? What is the local industry providing in terms of better and quality vehicles? If the local auto industry succeeds in selling cheaper and better cars, we will strongly ask the government to promote it. Instead of producing better and cheaper autos, the industry is deluding the government into imposing taxes on them (import of used cars) on the pretext of the industry. Small cars must be imported to give relief to overseas Pakistanis.”