Big Change for Car Buyers: Pakistan Plans Major Cut in Import Duties Under New Auto Policy

Pakistan Moves Toward Cheaper Cars with New Auto Policy

Pakistan is preparing to roll out a major auto sector policy that could significantly impact car prices and availability in the coming years. Under an agreement with the International Monetary Fund (IMF), the government plans to gradually reduce import tariffs on vehicles, aiming to make cars more affordable for consumers.

According to officials, the weighted average tariff on vehicle imports will decrease from 10.6% to 7.4% by 2030, marking a notable shift toward a more open and competitive auto market.

Immediate Relief Expected in Budget 2026

The upcoming Budget 2026-27, expected in early June, may bring the first round of relief. Sources indicate that tariffs could drop from 10.6% to around 9.5%, setting the stage for further reductions in the years ahead.

This move is part of Pakistan’s commitments under the $7 billion IMF Extended Fund Facility (EFF), which also includes a key decision:
👉 No new Regulatory Duty (RD) will be imposed on vehicle imports

What the New Auto Policy Will Change

The upcoming policy, expected to be implemented from July 1, 2026, is designed to reshape Pakistan’s auto industry.

Key highlights include:

• 🚗 Gradual reduction in import duties over 5 years

• 📉 Tariffs expected to fall below 6% by 2030

• 🏭 Focus on boosting local manufacturing and parts localization

• 💰 Goal to reduce vehicle prices for consumers

New Tariff System Coming

The current duty structure is set to be replaced with a simplified system:

• 0%

• 5%

• 10%

• 15%

Additionally, customs duties on imported vehicles are expected to be capped at 15%, making the system more transparent and predictable.

Used Car Imports to Become Easier

The government also plans changes for used vehicle imports:

• A 40% regulatory duty will apply temporarily in FY2026

• This duty will gradually be reduced and eventually removed

• Stricter rules will be enforced to prevent misuse of import schemes

At the same time, the personal baggage scheme has been abolished, and conditions for gift and transfer schemes have been tightened.

Government and IMF Alignment

Officials confirm that the policy has been developed in close coordination with the IMF. It will be formally shared before final approval by the federal cabinet.

Adviser to the Prime Minister on Industries, Haroon Akhtar Khan, stated that consultations with stakeholders are nearly complete and the policy is in its final stages.

Focus on Safety and Environmental Standards

Alongside tariff reforms, the government is introducing new regulations under the Motor Vehicle Development Act.

This law will:

• Set modern safety standards for vehicles

• Introduce environmental compliance requirements

• Strengthen the role of the Engineering Development Board

The bill is expected to be approved by parliament before the end of June 2026.

What This Means for Pakistani Buyers

If implemented effectively, this policy could bring several benefits:

✔️ Lower car prices over time
✔️ More variety of vehicles in the market
✔️ Improved quality and safety standards
✔️ Increased competition among manufacturers

However, the full impact will depend on how smoothly the policy is executed and how the market responds.

Final Take

Pakistan’s new auto policy signals a major shift in the country’s economic and industrial strategy. By reducing tariffs and opening up the market, the government aims to balance affordability with local industry growth.

For consumers, this could mean better choices and potentially lower prices in the near future.

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