Pakistan to slash auto tariffs over five years to spur car exports

KARACHI: Pakistan will gradually reduce tariffs on the auto sector over the next five years as part of a plan to expand exports from tractors and motorcycles to cars, Commerce Minister Jam Kamal Khan said on Wednesday.

Speaking to industry representatives in Islamabad, Khan said a committee comprising the Commerce Ministry, Federal Board of Revenue and Ministry of Industries will address sector challenges. He urged automakers to participate in the upcoming industrial policy and noted rising competition in the local market.

“After tractors and motorcycles, we will now also export cars,” Khan said, adding that the government will prepare a strategy for auto sector growth and exports.The minister tied new opportunities to a recent US trade agreement that cut tariffs on Pakistani goods to 19 per cent, the lowest in the region. He said imported used cars should meet quality and environmental standards.

Industry participants warned that higher production costs from new technologies and the influx of used vehicles are squeezing local manufacturers.The auto industry, which accounts for 7-16 per cent of manufacturing GDP and employs millions, is dominated by Toyota, Honda, Suzuki, Hyundai, Kia, and newcomers like MG and Haval. Vehicle sales fell 49 per cent in July after pre-budget buying and tax changes, while capacity utilization remains at about 24 per cent.

The fiscal 2025-26 budget added a Green Tax of 1.0 per cent to 3.0 per cent on internal combustion vehicles and left a wide gap in GST rates for hybrids and electric vehicles, prompting concerns over policy consistency. Experts warn that high taxes, policy uncertainty, and weak industrial support could curb demand and deter investment.