Pakistan's car market has never been cheap. Anyone who has visited a showroom recently knows the drill — sticker prices that make you double-check the zeros, long waiting periods, and a selection that still feels limited compared to what the rest of the region enjoys. For years, buyers have been told that high import duties protect local manufacturing and jobs. That argument is now being seriously challenged.
The government is currently working on a new auto sector policy — the Automobiles and Auto Parts Manufacturing Policy 2026–31 — that could mark the biggest shift in how Pakistan taxes and regulates vehicles in decades. At its heart is a plan to significantly reduce import tariffs, open the market to more competition, and align the sector with the broader National Tariff Policy (NTP) 2025–30. The current policy expires on June 30, which means the clock is ticking.
The Big Picture: What's Being Proposed
The proposed framework would restructure Pakistan's vehicle tariff system into four slabs — 0%, 5%, 10%, and 15% — replacing the current patchwork of customs duties, additional customs duties, and regulatory duties that have kept Pakistan's auto market one of the most protected in the region.
The weighted average tariff on vehicle imports, currently sitting at around 10.6%, is targeted to fall to 7.4% by 2030 and potentially as low as 5.99% under the National Tariff Policy roadmap. For the upcoming FY2026–27 budget, a reduction to 9.5% is on the table as a first step. The regulatory duty on imported used vehicles at 40% above the rate for new cars is expected to be down to zero. Duties on auto parts could also be cut significantly.
The government has also decided not to introduce any new rules or responsibilities in the future, and the rules for personal baggage and gift items related to used vehicle imports have already been made stricter to stop people from using them improperly.
The IMF Connection
None of this is happening in a vacuum. Pakistan's new auto policy is being developed under the framework of the IMF's $7 billion Extended Fund Facility, and the fund has a direct interest in how the sector is reformed. Trade liberalisation — including in the auto sector — is part of Pakistan's broader commitments to the lender.
What makes the situation interesting is that the government appears to have set more ambitious reform targets than what the IMF strictly requires. The fund's conditions focus on keeping the weighted average tariff below 6% by 2030, and it has reportedly been flexible on the upper ceiling for customs duties. Yet the government had already approved a roadmap to cap customs duty at 15% by 2030 — a more aggressive cut than the IMF demanded. That self-imposed ambition is now creating friction, particularly on the question of how fast to move and how much protection to retain for local assemblers in the transition period.
Where the Disagreements Lie
The delay in finalising the policy is not just about the IMF. There is a genuine split inside the government itself. The industry ministry is pushing to maintain higher duties on locally assembled vehicles to protect manufacturers during the transition, while the commerce ministry wants full alignment with the NTP regardless. Both positions have merit — the question is how to balance short-term industry stability with long-term consumer benefit.
There is also the revenue impact to consider. Cutting tariffs means cutting a significant source of government income, and with fiscal pressures already tight, that is not a number anyone in the Finance Ministry is comfortable with.
What This Means If You're Buying a Car
If the policy goes through as proposed, the most immediate benefit for buyers would be increased competition. Cheaper imports — especially of completely built units and used vehicles — would force local assemblers to sharpen their pricing. Right now, many consumers feel that OEMs in Pakistan price vehicles based on what the market will bear rather than actual cost efficiency. That dynamic would be harder to sustain in a more open market.
Buyers interested in used imports could also benefit from a clearer, more structured import regime, replacing the current confusion around baggage schemes and informal channels.
That said, meaningful price relief at the showroom will not happen overnight. The tariff reductions are spread over five years, and legislative approvals, inter-ministerial sign-offs, and IMF review all add layers of delay.
The Bottom Line
Pakistan's auto sector has been heavily shielded for decades, and that protection has not produced the world-class manufacturing base it was supposed to. The NTP-based reform plan is a serious attempt to change that. Whether it succeeds depends on whether the government can resolve its internal disagreements and push the policy through before June 30 — or risk another extension that keeps buyers waiting and the industry comfortable with the status quo.