Pakistan’s government has announced a sweeping shift in auto import policy aimed at protecting the local industry, as part of commitments made under the IMF-supported National Tariff Policy.

Commercial imports of used vehicles will be permitted from September, but only with a hefty 40% surcharge above the duty levied on new cars. Simultaneously, imports of low-quality and accident-damaged vehicles will be strictly banned.

At a joint session of the Senate's industry and finance standing committees, the policy change was announced. According to Mohammad Ashfaq, Joint Secretary for Trade Policy, the 40% additional tariff adds another degree of protection for cars made in the country.

The majority of imported cars, which make up almost 25% of domestic demand, enter the market through programs like residence transfers, baggage transfers, or gifts. Commercial imports of used cars are still prohibited at the moment.

Although these vehicles are frequently slightly damaged, buyers still choose them over locally made alternatives.

In accordance with its IMF commitments, Pakistan will begin allowing commercial imports of used cars up to five years old in September. By July of the following year, all age and quality restrictions will be removed.

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Over the course of four years, the 40% surcharge will be progressively eliminated and eventually lowered to zero. In the future, imports of automobiles between the ages of six and eight might be permitted as long as they adhere to safety and environmental regulations.

Parallel to easing car import rules, Pakistan is also bound by IMF guidelines to simplify and lower its overall tariff structure.

The plan seeks to slash average import duties from 20.2% to 9.7% over five years. In FY26, the first year of the plan, the average rate will be reduced to 15.7%, achieved by lowering customs duty to 11.2%, additional customs duty to 1.8%, and regulatory duty to 2.7%.

Over time, additional and regulatory duties will be phased out, and the number of tariff slabs streamlined to four, with a maximum rate of 15% by 2026.

But the auto industry has raised concerns. Industry leaders caution that these changes could have a catastrophic effect on regional manufacturing, leading to a mass loss of jobs and the eventual collapse of the industry.

An estimated Rs878 billion in revenue and more than 2 million jobs could be lost. Recorder for Business The government argues that the rationalization of tariffs and the liberalization of used car imports are necessary reforms to comply with IMF structural adjustment requirements and international trade standards.