The federal government is set to unveil the national budget for the fiscal year 2025-26 on June 2, with a key focus on overhauling the automobile import policy.

Sources told SAMAA that a major relief may be on the cards for consumers as imported vehicles — especially new models — are expected to become significantly cheaper under the upcoming budget.

This development comes amid persistent pressure from the International Monetary Fund (IMF), which has called for a reduction in import-related taxes, particularly in the automobile sector, as part of broader reforms aimed at increasing market openness and competition.

According to senior officials in the Federal Board of Revenue (FBR), the IMF has urged the government to revise the high tariffs currently imposed on vehicle imports and to liberalize the commercial import regime.

The multilateral lender believes this would not only promote transparency but also help combat the prevailing trend of over-invoicing and misuse of gift schemes commonly used to import used cars.

Proposals under consideration

Sources within the FBR revealed that multiple proposals are under review to restructure the customs duties applied to imported vehicles. Among the prominent ones is a plan to reduce import duty rates by 5 to 30 percent on brand-new vehicles falling in the following categories:

Small vehicles with engine capacity up to 850cc
Mid-sized and larger vehicles with capacity up to 1801cc

Currently, the duty on imported vehicles ranges between 50 to 100 percent, depending on the engine size and vehicle category.

If approved, the proposed cuts would mark the most significant reduction in recent years and could potentially reshape the dynamics of Pakistan’s auto market, which has long been dominated by a few local assemblers operating in a highly protected environment.

However, sources clarified that used imported vehicles may not see the same relief. The government is considering keeping the customs duties on used cars relatively high, to discourage the grey market and protect domestic manufacturers from competition.

Opening the door to older vehicles

In a related move, the FBR is also examining a proposal to permit the import of used vehicles up to five years old, compared to the current limit of three years. Officials added that a gradual expansion to allow imports of vehicles up to 10 years old is also under deliberation. This phased relaxation, if implemented, would widen consumer access to affordable options in the second-hand market.

The proposals are part of a broader strategy to bring down vehicle prices, which have soared in recent years due to a combination of high taxes, rupee depreciation, and tight import restrictions.

Push for electric vehicles

The upcoming budget is also expected to reaffirm the government’s commitment to promoting electric vehicles (EVs) in line with the 2019 National Electric Vehicle Policy. This includes potential tax exemptions and incentives for the import and local assembly of EVs and their components.

The Energy Ministry and Ministry of Industries have reportedly supported this initiative, viewing it as a step towards reducing Pakistan’s reliance on fossil fuels and curbing air pollution in major cities.

Local industry vs consumer interests

While the proposed changes may benefit consumers, they are likely to meet resistance from local automobile assemblers, who have long operated behind protective tariff walls. Industry groups are expected to lobby against significant duty reductions, warning that it may hurt local production and lead to job losses.

However, economists and consumer rights groups argue that competition from imports is essential to improve quality and bring down prices in a sector where limited options and delayed deliveries have long frustrated car buyers.

Speaking to SAMAA, a senior official familiar with the budget-making process said:

“The auto sector is being reviewed from a taxation standpoint. The IMF’s suggestion aligns with our broader reform goals — to reduce anti-competitive practices and open up the economy. We are considering options that protect domestic industry but also deliver relief to the public.”

The official added that final decisions will be taken closer to the budget presentation date after consulting stakeholders from the automobile industry, commerce ministry, and international partners.