Car prices in Pakistan likely to drop as govt plans major traffic reduction

ISLAMABAD: In an attempt to slash vehicle prices in the country by lowering duties on cars, jeeps, and auto parts, the federal government has begun the process of reconfiguring tariff lines for the automobile sector under the new National Tariff Policy (NTP).

Commerce Secretary Jawad Paul told the National Assembly Standing Committee on Finance that the full implementation of tariff reform could bring customs duties down to 25-50 percent in respect of vehicles and auto parts from nearly 156 percent in the maximum duty structure to around 74 percent.

“The idea is to make vehicles relatively cheaper for the masses while enhancing competition for local assemblers in the auto industry,” the secretary of commerce said.

The proposal envisages reducing duties and regulatory charges by Rs 143.4 billion through rationalisation of tariffs by cutting down thousands of tariff lines by one level in the second year, in keeping with NTP.

The government is moving towards fewer and less protective tariff slabs and fewer import restrictions for common items to increase competition. It has been stipulated that in the second year, the second phase of tariff rationalisation of duties and regulatory charges will be reduced by Rs143.4 billion.

However, while prices of vehicles and parts will fall, consumers will have more choice, while local manufacturers may suffer losses from a surge in the imports of cars.

Under the International Monetary Fund-supported programme, the government is all set to reduce protection in the automobile sector gradually.

Differing Views Delay Tariff Reform Finalisation. Pakistan is also required to continue reform measures in the automobile sector to have it on a path for more competition and efficiency, with gradually lowering tariff barriers for greater competition.

Government officials, however, held back their views on the issue, stating that there exist conflicting opinions and recommendations over liberalizing the auto sector with accelerated and broad-based cuts.

This issue has come to the table from the International Monetary Fund, but still, a consensus could not be forged, and the move remained on hold.

The Pakistani automobile industry is preparing for possibly the biggest reform since the 1990s after the country’s policy framework regarding the current auto policy (AP) expires on June 30 this year, while new measures and an auto framework are expected to be finalized around the same time of the year.