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Tariffs

Pakistan to Gradually Cut Tariffs on Auto Sector, Work on Export Strategy

Strategic Insights

— 1 min read

Pakistan's government is aiming to boost the country's automobile industry by gradually reducing tariffs over the next five years and working on a strategy to increase exports. Commerce Minister Jam Kamal Khan announced the plan during a meeting with industry representatives in Islamabad, emphasizing the importance of a healthy competition in the local market. The government has also formed a committee to address sector challenges and invited the industry to participate in the upcoming industrial policy.

Key Takeaways:

  • Pakistan will gradually cut tariffs on the auto sector over the next five years, with the aim of strengthening the local market and boosting overseas sales.
  • A committee, comprising officials from the Commerce Ministry, the Federal Board of Revenue, and the Ministry of Industries, has been formed to address sector challenges.
  • The government has invited the industry to participate in the upcoming industrial policy and has encouraged healthy competition in the local market.
  • Imported used cars will have to meet quality and environment-friendly standards, and new export prospects are linked to the recently signed US tariff reduction agreement.
  • The Pakistan Automobile Industry employs millions of people and contributes around 7 percent of Large Scale Manufacturing (LSM) and 7-16 percent of the manufacturing GDP.
  • Local assembly is dominated by established players like Honda, Toyota, Suzuki, Hyundai, Kia, and newcomers such as MG and Haval.
  • The market includes motorcycles, tractors, cars, and commercial vehicles, but remains highly concentrated among a few brands.
  • The fiscal year 2025-26 budget introduced several changes impacting the auto industry, including a new Green Tax applied to internal combustion engine vehicles.
  • Industry experts warn that high taxes, policy uncertainty, and weak industrial support are curbing demand, and recent vehicle sales dropped 49 percent month-on-month in July 2025.

Statistics:

  • Tariffs on the auto sector will be gradually reduced over the next 5 years.
  • 7% of Large Scale Manufacturing (LSM) is contributed by the Pakistan Automobile Industry.
  • 7-16% of the manufacturing GDP is accounted for by the Pakistan Automobile Industry.
  • 49% drop in vehicle sales month-on-month in July 2025.
  • 24% of capacity utilization in the Pakistan Automobile Industry.

Sources:

  • Commerce Minister Jam Kamal Khan
  • Pakistan's Federal Board of Revenue
  • Pakistan's Ministry of Industries
  • US tariff reduction agreement
  • Automotive Industry Development and Export Policy (AIDEP) 2021-2026
  • Pakistan's fiscal year 2025-26 budget report
  • Industry experts and stakeholders.

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