Pakistan to cut car duties, open market by 2030

Dubai: Pakistan is set to roll out a sweeping new five-year auto sector policy in consultation with the International Monetary Fund, aimed at slashing import tariffs, restructuring duties and opening up the vehicle market by 2030, The News reported on Wednesday.

Under the $7 billion Extended Fund Facility (EFF) agreed with the Washington-based lender, Pakistan has committed that no new Regulatory Duty (RD) will be imposed on imports — a move seen as a clear shift towards trade liberalisation.

As part of the broader tariff reform, the weighted average tariff is expected to be reduced from 10.6% to 9.5% in the 2026–27 budget, which is tentatively scheduled to be unveiled on June 1, 2026.

The upcoming auto policy, currently in its final stages of preparation, will lay out a detailed roadmap to align with the National Tariff Policy (NTP). Officials said the plan is to bring down the weighted average tariff from 10.6% in FY25 to 7.4% by FY30, with the auto sector expected to go even further — lowering tariffs to below 6%, specifically to 5.99%.

Key takeaways

• Tariffs to fall: Weighted average to drop from 10.6% to 7.4% by FY30; auto sector to ~6%

• Duty cap set: Customs duty on vehicles to be capped at 15%

• New tariff slabs: 0%, 5%, 10% and 15% to replace existing structure

• RDs to go: Regulatory and additional duties to be phased out

• Used car duty cut: 40% levy to be gradually reduced to zero

• Market opening: Imports liberalised, competition expected to rise

• Policy timeline: New auto policy effective July 1, 2026

• IMF link: Reforms aligned with $7bn EFF commitments

The policy, set to take effect from July 1, 2026, is designed to boost local manufacturing, increase localisation of parts and curb vehicle prices, while gradually exposing the domestic market to greater competition.

Over the next five years, customs duties on completely built-up (CBU) vehicles are expected to be capped at 15%. A simplified four-slab tariff structure — 0%, 5%, 10% and 15% — will replace the current regime, signalling a shift towards a more predictable and transparent system.

Advanced stage

At the same time, a 40% regulatory duty currently imposed on used vehicle imports for FY2026 is expected to be phased down and eventually eliminated in the coming fiscal years, in line with the broader tariff rationalisation plan.

Adviser to the Prime Minister on Industries Haroon Akhtar Khan confirmed that the policy is at an advanced stage and will soon be presented to the prime minister and federal cabinet. “We have consulted all stakeholders to strike a consensus, and where differences remain, a balancing approach will be applied,” he said.

Officials said the policy will be formally shared with the IMF by the end of the current month, ahead of cabinet approval, ensuring alignment with Pakistan’s commitments under the EFF programme. The plan includes the progressive elimination of Additional Customs Duty (ACD) and Regulatory Duties, alongside a substantial reduction in standard customs duty rates by FY30.

The reform push is also backed by legislation. The proposed Motor Vehicle Development Act, which has been submitted to parliament, seeks to provide a statutory framework for environmental and safety standards through the Engineering Development Board. It is expected to be approved by the National Assembly before the end of June 2026.

In a parallel move to tighten oversight, the government has legalised commercial imports of vehicles while abolishing the personal baggage scheme and tightening rules governing gift and transfer of residence schemes, aiming to curb misuse and bring greater transparency to the import regime.