ICMA warns of high stakes in used car import policy

KARACHI: The Economic Coordination Committee’s (ECC) decision to allow the commercial import of used vehicles up to five years old, with phased reductions in regulatory duties, is set to reshape Pakistan’s automotive sector, according to a comprehensive study released by the Institute of Cost and Management Accountants of Pakistan (ICMA).

The report, developed by ICMA’s research and publications department, highlights that this landmark policy will expand consumer choice, modernise the domestic industry and create both opportunities and risks across the wider economy.

The ICMA analysis underlines that consumers, who have long faced high prices and limited options, will benefit from access to safer, fuel-efficient and hybrid vehicles. However, affordability gains will be gradual, as the initial 40 per cent regulatory duty keeps prices elevated in the first year, with relief emerging as duties are cut by 10 per cent annually until eliminated in FY 2029–30.

For the domestic industry, the ICMA warns of mounting competitive pressure. Local assemblers, traditionally protected by high tariffs, will need to modernise production and improve quality to remain viable. “The ECC 2025 decision challenges this long-standing model, affecting production volumes, pricing, quality standards, supply chains and employment,” the report notes, with particular risk to small and mid-sized passenger car segments dominated by local manufacturers.

The vendor and spare parts industry, which supports over 300,000 jobs, is flagged as especially vulnerable. The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) estimates annual losses of Rs60 billion in displaced demand and warns that unchecked imports could weaken localisation and trigger job cuts. At the same time, the ICMA stresses that vendors who adapt, by servicing imported cars, hybrids and EVs, could capture new opportunities.

Government revenues, meanwhile, will see short-term gains from duties on imports but face medium- to long-term risks of contraction as local production declines. The report cautions that without stronger customs enforcement, under-invoicing and evasion could erode revenues further.

Foreign exchange reserves will also come under strain as import volumes rise, though the ICMA notes that hybrid and fuel-efficient cars may ease long-term oil import costs. Environmental outcomes will hinge on enforcement: euro-compliant imports could cut emissions, while lax monitoring could worsen pollution.

Drawing lessons from countries such as India, Bangladesh, Kenya and Sri Lanka, the ICMA recommends strict age limits, phased fiscal measures, robust inspection systems and incentives for clean technologies.

Vice President ICMA and Chairman Research and Publications Committee Muhammad Yasin said the study is intended to support informed policy dialogue: “This analysis will serve as a valuable resource for policymakers, the auto industry and other stakeholders, helping them address the opportunities and challenges of this important policy change.”