Industry leader warns tariff cuts could undermine local auto sector

LAHORE: Muhammad Ali Tabba, chairperson of Lucky Motor Corporation (LMC), has expressed serious concerns over the government’s proposed Tariff Rationalisation Plan, particularly the planned reduction of duties on completely built-up (CBU) vehicles to 15 per cent over the next five years.

In a meeting with Finance Minister Muhammad Aurangzeb and Special Assistant to the Prime Minister (SAPM) on Industries and Production Haroon Akhtar, Tabba cautioned that while the policy may aim to make vehicles more affordable for consumers, its implementation without careful planning could jeopardise the local automotive sector, dent investor confidence and contribute to a widening current account deficit.

He noted that under the Auto Development Policy (ADP) 2016-2021, international automakers from Korea, Europe and China had collectively invested around $1.2 billion to establish local manufacturing operations. The policy led to broader consumer choice, increased competition, and significant job creation across vehicle assembly and auto parts production.

While supporting the principle of tariff rationalisation, Tabba underscored the importance of maintaining a significant duty differential between CBU and completely knocked-down (CKD) imports to protect domestic manufacturing. He recommended that the government convene consultations with key industry stakeholders to determine an appropriate structure.

Tabba also raised objections to the proposed liberalisation of used car imports, saying that the local auto industry now produces and sells approximately 150,000 units annually, with around 16 brands operating in Pakistan -- providing far greater variety than in the past. In this context, he argued, there is little justification for opening the market to second-hand imports.

He warned that allowing the commercial import of used vehicles could turn Pakistan into a “junkyard” of obsolete cars and would undermine the country’s efforts to modernise its automotive sector.

Given Pakistan’s fiscal constraints and limited foreign exchange reserves, Tabba concluded that a liberalised import regime would be unsustainable, potentially triggering a drawdown in foreign reserves, a widening current account deficit, and further pressure on the rupee.

In response, the SAPM assured Tabba that the government would consider industry input carefully and conduct consultations with all stakeholders before finalising decisions on tariff rationalisation and used vehicle import policies.