KARACHI: Pakistan’s car imports surged by 61 per cent in July 2025 compared with the same month last year, reflecting the immediate impact of sweeping tariff reforms introduced under the Finance Act 2025.
According to data released by the Pakistan Bureau of Statistics, car imports reached $32.803 million in July, against $20.327 million in July 2024. In local currency terms, the value rose 62 per cent to Rs9.335 billion from Rs5.757 billion. The surge comes after the government reduced a range of duties and charges on imported vehicles from July 1, triggering demand.
Government officials argue the new regime is designed to curb smuggling, formalise imports and expand consumer choice, while also aligning with IMF-driven commitments on trade liberalisation and customs reforms.
However, the local automotive industry has raised alarm over the potential consequences. Major original equipment manufacturers (OEMs) including Pak Suzuki, Indus Motor Company and Honda Atlas fear that the surge in imports could undermine domestic production and investment. These firms are already contending with higher energy and compliance costs, as well as the introduction of carbon taxes.
The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has warned of serious risks to the country’s vendor base, which currently produces about 70 per cent of car parts locally and provides employment to nearly two million people. The association fears that uncontrolled used car imports could lead to job losses and reduced investment in local capacity.
Industry expert and former PAAPAM chairperson, Mashood Ali Khan, strongly criticised the policy, saying it contradicts efforts to build domestic capability. “We cannot afford the import of cars because of the shortage of foreign exchange reserves,” he said. “If you liberalise imports for six months, you end up crying for reserves for the next two years. On one hand, we invite OEMs to invest, and on the other, we open the door to used cars. This dual policy will not work.”
Khan also urged the government to focus on localisation and research. “The global auto parts industry is worth $600 billion. If Pakistan captures even 10 per cent of that, it would be transformative. But for that we must support SMEs and invest in R&D, not encourage import dependency.”
The pressure on local manufacturers is already evident. According to the Pakistan Automotive Manufacturers Association (PAMA), sales of locally assembled vehicles plunged nearly 49 per cent in July compared with last year, with Pak Suzuki recording a steep 72 per cent decline. Analysts attribute this to competition from cheaper imports and changing consumer preferences following the tariff cuts.
While the government expects that tariff rationalisation will increase formal imports and tax revenues by discouraging smuggling, experts caution that without parallel support for the local industry, Pakistan risks eroding its automotive base. The challenge is compounded by carbon taxes, which are inflating the price of locally produced cars and driving more buyers towards imported options.