ICMA Pakistan: Used Car Import Policy – A Balancing Act for Industry and Consumers
KARACHI: The Institute of Cost and Management Accountants of Pakistan (ICMA) has issued a statement regarding the government’s recent decision to allow the commercial import of used cars up to five years old, acknowledging potential short-term benefits alongside notable long-term challenges. While the initial 40% regulatory duty (RD) is expected to generate fiscal revenue and expand consumer choice, ICMA warns of potential strain on foreign exchange reserves, the balance of payments, and the future of Pakistan’s automotive industry.
ICMA’s Research and Publication Department highlights the historically protected nature of the local auto sector, which has limited competitive pressure and innovation. Previous liberalisation attempts faced industry resistance, demonstrating the sector’s sensitivity to policy changes. this new policy represents a substantial shift wiht the potential to reshape market dynamics.
In the short term,significant price reductions are unlikely due to the RD,exchange rate fluctuations,and importer markups. however, ICMA anticipates shifting consumer expectations, with potential buyers delaying purchases in anticipation of more affordable options. Imported vehicles, frequently enough equipped with advanced safety and efficiency features, coudl raise industry standards and encourage local manufacturers to improve their offerings.
As import duties decrease – 10% annually – imported vehicles will become increasingly competitive, particularly by FY28 when duties reach 20%. This will broaden consumer choice, especially in the popular small and mid-sized car segments, with models like the Toyota Vitz, Honda fit, and Suzuki Swift poised to challenge domestic alternatives.
The policy is expected to drive modernization within the local automotive industry, pushing manufacturers to adopt improved safety standards and fuel-efficient technologies. By FY30, with the full removal of duties, the market will face global competition, potentially leading to industry consolidation as less adaptable assemblers struggle. ICMA identifies opportunities for stronger players investing in technology, international partnerships, and electric/hybrid vehicles.
However, the impact extends beyond assemblers.ICMA cautions that a decline in local production will negatively affect the extensive network of parts suppliers and SMEs. These businesses will need to diversify into aftermarket support or invest in components for newer technologies to survive. While job losses are possible in assembly and supplier networks, new opportunities may emerge in import-related services like certification, inspection, and logistics.
ICMA emphasizes that the policy will not immediately benefit lower-income groups due to sustained high prices.Moreover, increased import volumes could exacerbate pressure on Pakistan’s foreign exchange reserves and balance of payments.
Ultimately, ICMA calls for a balanced policy that safeguards external accounts, supports industry modernisation, and ensures lasting consumer benefits. The institute stresses the need for careful monitoring and proactive measures to mitigate potential negative consequences and maximize the long-term benefits of this significant policy shift.
Published in Dawn, October 4th, 2025
