Karachi: The local automotive industry and its suppliers face uncertainty before the FY26 budget, since the International Monetary Fund (IMF) is pressing the Government to rationalize automobile tariffs and allow commercial import imports of used cars.
The IMF believes that the automotive sector is highly protective, and it is necessary to rationalize tariffs to improve competitiveness and efficiency to benefit consumers. There are more than 40 percent taxes and tariffs on locally produced vehicles.
On May 6, automobile assemblies and partial vendors met with special prime minister assistant (Samp) Haroon Akhtar Khan in Islamabad and transmitted their concerns that the local industry would collapse if commercial imports of used cars are allowed and CBU tariffs are reduced below a certain threshold.
The SAPM assured them that the government did not intend to endanger industry and investments. On the contrary, the Ministry will protect the local industry and try to achieve balanced tariffs with the industry consultation.
The old guards within the local assemblies and vendors are alarmed as the government moves to rationalize the protection of excessively high rates under the direction of the IMF.
Assemblies fear the collapse of the industry if the commercial import of cars is used that is allowed
The manufacturers of the piece have been operating under the highest tariff protection, enjoying effective rates of up to 98pc. The price of the land anywhere is valued at $ 100, with 46 percent service, 18 percent GST and minimum margins of 15 percent, for a total of $ 198.
They highlighted all this load must be assumed by consumers, who are already dealing with inflation and stagnant wages. The IMF, which recognizes the extraordinarily high tariff protection rate, has recently addressed the Government to rationalize tariffs under the last waiting agreements.
This will provide a lot of relief to consumers, since prices can adjust with a reduced service structure. The ancient guards within the Association of Automotive Pieces and Automotive Accessories of Pakistan wish to maintain the highly inefficient tariff structure and are looking for meetings with government officials to resist the demands of the IMF.
Its usual arguments are that any reduction in tariffs will cause irreparable damage to the industry without addressing the central theme of overprotection and excessive prices of the pieces in the market.
However, auto parts suppliers, under the PAAPAM umbrella, believe that their competitiveness can be judged through the offer of RS325 billion in auto parts for the local industry, estimating a saving of foreign exchange of $ 480 million annually, together with the advantage of the guarantee of direct jobs of more than 150,000 and more than 500,000 indirect jobs through jobs through jobs States of states.
During the first stage, the Government has proposed to rationalize tariffs in five percent to 10-15pc, together with the gradual reduction in the additional customs duty (ACD) and the regulatory duty (RD). It is proposed that the reduction of the higher engine in CBU rate is much larger.
Part of the manufacturers of the contest that their prices generally have a cost (less) model, thus saving currencies and ensuring the stability of prices, although their competitiveness can be judged if they can compete in the cost of FOB instead of the cost of the land.
The National Committee of the Permanent Assembly of the Industries has been questioning local manufacturers and assemblies that if they are really competitive and produce global quality parts and vehicles, why have they not been able to export from Pakistan?
Many PAAPAM members have invested in modern technologies, followed by joint companies and technical collaborations with several foreign companies. More than 40 PAAPAM members are also exporting pieces to Europe, Africa, the United States and China, although exports are insignificant.
Paapam does not agree with the IMF’s impression that the Pakistani automotive sector rests on a protein sector with support rates.
A car assembler said that the rationalization of automatic tariffs, together with the additional competition of the new participants, will help the government reduce vehicle prices and can also help improve slow demand in the automotive sector.
Posted in Dawn, May 11, 2025