KARACHI: Imports of used cars into Pakistan rose sharply in September after the government relaxed regulations, prompting criticism from local manufacturers while importers say the change will bring needed competition to the auto sector.
A total of 2,276 vehicles were imported last month, 2,238 of them under the Gift Scheme, according to Commerce Ministry data. Restrictions under the Personal Baggage Scheme remain strict.
The increase follows a brief slump. The government abolished the Baggage Scheme and imposed limits to curb misuse of used car programs for overseas Pakistanis. Only 48 used cars were imported in May, mostly through the baggage scheme.
Imports then began climbing:
- June: 843 vehicles, including 806 under the Gift Scheme
- July: 1,938 vehicles, including 1,876 under the Gift Scheme
- August: 1,445 vehicles
- September: 2,276 vehicles, including 2,238 under the Gift Scheme
A senior auto industry executive said a 20-25% cut in duties on completely built units in the 2026-27 budget lowered import costs. The executive also said a one-year restriction on transferring ownership of imported vehicles is not being enforced in some cities.
"This business is flourishing again, but at the cost of the domestic auto industry which consists of 13 assemblers and over 300 auto parts manufacturers," the executive said.
Parts makers warn of lost output
Auto parts vendors said vehicle production had only recently begun to rise after a three-year gap, contributing to growth in Pakistan's large-scale manufacturing sector.
Abdul Rehman Aizaz, chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers, said locally built cars contain up to 60% local parts by value, averaging 1.5 million rupees per vehicle. He said September's imports therefore meant a loss of 3.4 billion rupees in local parts production, which supports jobs and operates in the documented economy.
Aizaz called it unfair that the proposed auto policy would cut import duties on new cars while used car imports were being encouraged. He described the used car business as completely unregulated and said Pakistan was moving toward a market dominated by imported new and used vehicles, with no industrial activity.
Importers cite competition, legality
Importers countered that Pakistan needs a competitive economy and that importing used cars is legal when done according to government rules.
Mian Shaoib Ahmed, chairman of the All Pakistan Car Dealers & Importers Association, said all imported vehicles undergo pre-shipment inspection by accredited companies in Japan, the source of most used cars.
Ahmed, who also sits on the executive committee of the Federation of Pakistan Chambers of Commerce & Industry, said demand for used cars exists in Pakistan. He argued that new Chinese entrants have yet to make their mark in the market, while Japanese assemblers in Pakistan are not ready for a competitive environment.
He praised the government's recent changes to the import regime and predicted that Gift Scheme and commercial imports will keep rising in the coming months.
New rules loosen criteria
Ahmed pointed to a Sept. 30 notification from the Engineering Development Board that relaxes the criteria for importing used vehicles. It removes the minimum capital requirement for importing companies. Any tax-registered individual or firm can now import vehicles, even if not registered with the Securities and Exchange Commission of Pakistan.
Under the notification, pre- and post-shipment inspections will be conducted through the Pakistan Standards and Quality Control Authority instead of the EDB.
The authority's chief executive officer said, however, that inspections are not done directly by the agency but through its registered inspection agencies. Only two local inspection agents are currently registered with it, both representing firms accredited with the Japanese Foreign Principals Inspection Agencies.
