Pakistan’s used car import landscape is entering its most disruptive phase in decades. Under the Finance Bill 2026 and a firm commitment to the International Monetary Fund, the government is opening the commercial vehicle import market wider than it has been in years, slashing duties, lifting age restrictions, and inviting competition that Pakistan’s protected auto assemblers have long managed to block.
What the Finance Bill 2026 Actually Proposes
In a significant shift in automobile import policy, the federal government is considering lifting the restriction on the import of used vehicles that are up to five years old, a development revealed by Federal Secretary Commerce Jawad Paul during a meeting of the National Assembly Standing Committee on Finance and Revenue.
Briefing the committee on the National Tariff Policy, the commerce secretary said the government plans to gradually reduce import duties and rationalize the tariff structure to enhance competition and improve consumer welfare.
As part of the proposed changes, the regulatory duty on imported used vehicles is expected to be reduced from 40 percent to 30 percent. As of July 1, 2026, the age limit for importing used cars and vehicles will be lifted entirely, though strict compliance with quality standards will remain mandatory.
Under the proposed reforms, customs duties will be capped at a maximum of 15 percent within five years, while lower regulatory duty slabs of 1 percent, 2 percent, and 2.5 percent are proposed to be abolished.
The IMF Connection: Why This Is Happening Now
This used car import liberalisation is not purely a domestic policy choice. Pakistan has agreed with the International Monetary Fund to introduce a new five-year auto sector policy that will gradually reduce tariffs on vehicle imports as part of trade reforms tied to the country’s $7 billion bailout program, with the weighted average tariff on vehicle imports to be cut from 10.6% to 7.4% over four years by 2030.
It has been recognised that trade protection for the automobile sector under the Auto Industry Development and Export Policy (AIDEP) 2021-26 is particularly extensive and imposes large welfare costs on Pakistanis, with a commitment to implementing a substantial reduction in protection for this sector in the next auto policy from July 1, 2026.
It was agreed that tariff rates incorporating the customs duty, additional customs duty, and regulatory duty for used vehicles would initially be set at 40% above the corresponding rate for new vehicles, with the premium reduced by 10 percentage points every year to zero by 2029-30.
The government and the IMF have also agreed on the gradual elimination of additional customs duties and regulatory duties in the auto sector by 2030.
How Big a Shift Is This on Duties?
Pakistan proposes a massive vehicle import duty cut from 150% to 70% in Budget 2026-27. Previously, importing a clean, modern Japanese car meant facing a staggering 150% import tax, which kept competition out and left Pakistani buyers with high prices for cars that often lacked basic modern features.
The final cost of an imported car still depends heavily on the value of the Pakistani Rupee, high international shipping costs, and local registration fees. For the first time in years, local car makers will feel real pressure, to compete with high-quality imports, they will be forced to lower their prices and stop treating basic safety features like airbags and stability control as luxury extras.
Local Auto Industry Pushes Back
Pakistan’s established assemblers are not accepting these changes quietly. The local car manufacturer lobby is fighting hard in Islamabad to stop these proposals from being implemented.
Their concerns are not without basis. Pakistan’s auto sector has welcomed previous policy shifts aimed at revitalising local manufacturing, and the decision to phase out used car imports under the baggage scheme halted a channel that brought in 42,125 units in FY2025 alone.
Committee Chairman Naveed Qamar observed that Pakistan’s auto industry has historically enjoyed a high level of protection, noting that increased imports could create greater competition in the market and help lower vehicle prices for consumers. This is precisely what assemblers fear.
The tension inside government is visible too. A point of friction remains within the government itself, during a parliamentary session, the Minister of State for Finance indicated that the government’s stance was not to reduce the prices of imported luxury vehicles used by the elite, yet the tariff structures submitted under the draft Auto Policy outline substantial cuts, even for cars with engines larger than 1800cc.
A Historical Pattern of Cycles
This is not the first time Pakistan has navigated this tension. In 2005, duty cuts encouraged a surge of small Japanese imports, but by 2008 carmakers successfully lobbied for restrictions, arguing their sales and investments were under threat. In 2012, the maximum age limit was reduced from five years to three, sharply curtailing inflows. The years that followed saw an ongoing cycle of relaxations and restrictions, with consumers protesting high prices and limited choices while industry groups warned that excessive imports could reduce local investment and slow parts production.
According to the Institute of Cost and Management Accountants, Pakistan’s average annual imports of used cars stand at 34,000 units, far higher than Thailand at 21,802, Vietnam at 532, and India at just 235. This data point is often used by local industry to argue that Pakistan is already over-exposed to used car inflows relative to its peers.
Quality and Safety Standards: The Key Condition
The government has been careful to frame liberalisation as conditional, not unconditional. According to the Ministry of Commerce, imports of used vehicles will continue to be subject to environmental and quality standards.
The commerce secretary also informed the committee that 62 safety standards currently applicable to imported vehicles would also be enforced on locally manufactured vehicles, a move that levels the playing field in terms of product quality expectations. You can verify the current import duty structure and applicable rules directly at the Federal Board of Revenue’s official vehicles page.
Vehicles classified as below average condition, repaired after major accidents, or carrying poor auction condition ratings will not be eligible for the exemption, and PSI certificates issued through internationally accredited principals of approved companies in Japan will be recognized as proof of compliance with minimum safety, environmental, and regulatory standards.
For Pakistani consumers interested in how local assembly of newer models fits into this shifting landscape, our earlier coverage of the Chery Tiggo 7 PHEV CKD launch in Pakistan explains how new-era local assembly is responding to competitive pressures.
What This Means for Car Buyers
For the average Pakistani buyer, the short-term picture is cautiously optimistic. The stated objective of the move is to promote consumer welfare, expand market access, and encourage competition in the automobile sector. Cheaper used car import duties and a lifted age limit means a wider range of Japanese and other international models could enter the market at more accessible price points.
However, the rates will only change once the final Finance Bill is officially passed by parliament, and given the strength of the local industry lobby, the final text may look different from what is currently on the table. The Engineering Development Board, which sets safety and environmental standards for vehicle imports, will also play a central role in determining which vehicles actually qualify.
Frequently Asked Questions
What is changing about used car import rules in Pakistan?
From July 1, 2026, the age restriction on commercially imported used vehicles is set to be lifted entirely. The 40% regulatory duty on used car import will be reduced to 30% immediately and phased down to zero by fiscal year 2030, as part of the Finance Bill 2026 and Auto Policy 2026-31.
Why is the government liberalising used car imports now?
The move is largely driven by Pakistan’s commitments under its IMF Extended Fund Facility program. The IMF has required Pakistan to remove quantitative restrictions on used car import and reduce overall auto sector tariff protection as part of broader trade liberalisation reforms.
How is Pakistan’s local auto industry responding?
Local assemblers and their lobby groups are strongly opposed to the reforms. They argue that opening the used car import market will reduce demand for locally assembled vehicles, threaten manufacturing jobs, and discourage new investment in domestic production capacity.
Will imported used cars definitely be cheaper after these changes?
Duty cuts will reduce the tax portion of import costs, but the final price of an imported used car also depends on the Pakistani Rupee exchange rate, international shipping costs, and local registration fees. Consumers should expect improvement in affordability, but a dramatic price drop is not guaranteed, especially if the Rupee weakens or shipping costs rise.
