ISLAMABAD: The automobile sector warned on Monday that the industry is on the brink of collapse due to measures introduced in the National Tariff Policy (NTP) 2025-30, cautioning that these could result in over two million people losing their jobs and jeopardise an annual income of Rs878 billion along with Rs302 billion in tax revenue.
This concern was raised by industry representatives during a joint meeting of the Senate Standing Committees on Finance and Revenue, and Industries and Production, co-chaired by Saleem Mandviwalla and Aon Abbas, convened to discuss the challenges facing the automobile sector.
Officials from the Commerce Ministry, however, argued that Pakistan has committed to the International Monetary Fund (IMF) to gradually lift restrictions on the commercial import of used motor vehicles, initially permitting cars less than five years old, provided they meet minimum environmental and safety standards by the first quarter of the 2026 fiscal year (by 30 September 2025).
Responding to this, Abbas questioned the relevance of the IMF’s conditions to consumers.
From July 2026 onwards, a new regulatory and testing regime will be introduced to ensure compliance with safety and environmental benchmarks, replacing the current age-limit conditions on imports.
Officials further explained that tariff rates on used vehicles will be set at 40% above those applicable to new vehicles in FY 2026. This tariff premium will then be reduced by 10 percentage points annually, with the differential completely eliminated by 2030.
Committee members expressed concern over the potential impact of these reforms on the local automobile industry. Meanwhile, the Commerce Ministry maintained that the reforms are part of Pakistan’s structural commitments to the IMF aimed at trade liberalisation and providing consumers access to safer and more environmentally friendly vehicles.
Commerce Ministry officials stated that, in line with the objectives of this policy, tariffs on the auto sector will be rationalised to enhance competitiveness, productivity, and consumer welfare.
The current Auto Industry Development and Export Policy 2021-26 remains in effect until June 2026. A new auto policy, effective from 1 July 2026, will include substantial duty reductions, reviewing SROs 655(I)2006, 656(I)2006, and 693(I)2006, eliminating all Additional Customs Duties (ACDs) and Regulatory Duties (RDs), and reducing Customs Duty (CD) rates.
The NTP 2025-30 targets overall tariff reductions, including the elimination of ACDs within four years, removal of RDs within five years, phasing out of the 5th schedule within five years, introduction of four customs duty slabs (0%, 5%, 10%, and 15%), and setting a maximum customs duty of 15%.
Committee members questioned the quality of both locally manufactured and imported vehicles, as well as the deletion policy and local manufacturing targets as per the agreed policy. Sector representatives rejected claims of compromised quality, affirming that local manufacturing standards remain uncompromised.
Representatives of the automobile sector highlighted that the current tax regime and recent reductions in regulatory duties on used cars have severely impacted new vehicle sales, creating obstacles for the industry.
They noted that annual vehicle production in Pakistan remains around 150,000 units – the same as in 2004. Although the sector has made strides in localisation, the decrease in regulatory duty on used cars threatens its survival.
One industry representative, expressing disappointment with the NTP, stated, “It’s better to stop production as the tariff policy would wipe out the industry.”
They further noted that, in some cases, the government collects taxes exceeding 60%. If the government aims to reduce prices, this could be achieved by lowering tax rates, they added.
Representatives from Toyota Indus Motors highlighted existing taxes on various vehicle segments, noting that the government imposes Rs144 million in taxes on the SUV Fortuner, which has a market price of Rs244 million.
The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) also expressed serious concerns about the tariff policy, warning that dismantling the auto parts industry would trigger irreversible job losses and adversely affect imports, climate, fiscal stability, and competitiveness – impacts that no fragile economy can absorb. They recommended exempting the automobile industry from the NTP 2025-30 tariff flattening.
Senator Muhammad Abdul Qadir supported the government’s decision to reduce regulatory duties, stating it would foster competitive markets and benefit consumers.
Following detailed deliberations, the Joint Committee recommended rationalising the regulatory duty on used cars, emphasising that the livelihoods of two million households connected to the automobile sector are at stake.
Regarding the Cabinet’s recent decision to close the Utility Stores Corporation, officials from the Industry and Production Ministry stated that a relief package of approximately Rs14 billion is underway to support affected USC employees.
Copyright Business Recorder, 2025
