Pakistan Allows Used Car Imports with 40% Duty

The federal government of Pakistan has greenlit the commercial import of used passenger cars up to five years old, effective from September 2025, with imports permitted until June 30, 2026. A 40% regulatory duty will apply in the first year, decreasing by 10% annually until it is fully eliminated by FY30. This phased framework aims to balance consumer affordability with the protection of the local auto industry, ensuring imported vehicles meet stringent safety and environmental standards.

According to the Institute of Cost and Management Accountants (ICMA), Pakistan imports an average of 34,000 used cars annually, significantly outpacing regional peers like Thailand (21,802 units), Vietnam (532 units), and India (235 units). Officials argue this high volume positions Pakistan as a regional outlier, necessitating a more balanced policy approach.

The government drew inspiration from global practices. Bangladesh allows imports of vehicles up to four years old, requiring direct sourcing from the country of origin with de-registration certificates, alongside customs duties, VAT, and inspections. India enforces stringent rules, permitting only right-hand drive vehicles under three years old with specific engine limits, subject to compliance testing, a five-year roadworthiness requirement, and import duties up to 125%. Kenya adopts a rolling seven-year age limit, allowing vehicles manufactured from July 2018 onward as of mid-2025, with pre-export inspections and domestic roadworthiness checks. Sri Lanka, after lifting a five-year ban in February 2025, permits private imports under strict conditions, limiting individuals to one vehicle per year through registered importers. South Africa restricts imports to returning nationals and permanent immigrants, allowing one car per family with duties, VAT, and rigorous documentation. Nigeria, tightening rules in May 2025 to curb older, polluting vehicles, allows duty-free imports for cars made in 2015 or later, while penalizing those over 10 years old. The Philippines restricts imports to qualified individuals with a Certificate of Authority to Import from the Fair-Trade Enforcement Bureau, imposing a 40% customs duty, 10% VAT, and ad valorem taxes ranging from 15% to 100% based on engine size.

Pakistan’s policy has seen multiple shifts. In the 1990s, commercial imports were largely banned to protect local assemblers, limiting consumer choices and driving up prices. The 2000s allowed overseas Pakistanis to import vehicles under schemes like Gift, Baggage, and Transfer of Residence, though many cars entered the local market. In 2005, duty cuts spurred a wave of small Japanese imports, but by 2008, carmakers successfully lobbied for restrictions, citing threats to their sales and investments. In 2012, the maximum age limit was reduced from five years to three, significantly curbing inflows, while the Automotive Development Policy was introduced to attract local assembly investments. Subsequent years saw alternating relaxations and restrictions, with consumers protesting high prices and limited options, while industry groups warned that excessive imports could harm local investment, slow parts production, and strain foreign exchange reserves.

The September 2025 policy is presented as a sustainable compromise, gradually reducing duties while ensuring roadworthy and environmentally compliant vehicles, aiming to enhance consumer access without jeopardizing the domestic auto sector.