KARACHI: Imports of used cars under the gift scheme have continued, with more than 2,000 units arriving in the country during October despite tough import restrictions by the government, according to auto vendors.

While used car imports continue, vendors are also unhappy with the new auto policy announced by the government last week, which they believe will damage local component manufacturing by 1,200 engineering enterprises.

“All these vehicles are imported through payments to Japanese auction houses via hawala channels and unregulated domestic sales through cash transactions,” former chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) Aamir Allawala claimed.

He said only seven units had arrived under the gift scheme in May this year. After maintaining an upward trend, the number rose to 2,238 in September.

Claim auto policy may hurt 1,200 local component manufacturers

This showed that the significant restrictions imposed by the government had failed to prevent the misuse of schemes for overseas Pakistanis, he said.

Traders had found a way around the restrictions, he added, saying domestic component manufacturers were the net losers.

Several locally assembled vehicles use Rs1.5 million to Rs2.5m worth of domestically made parts produced by 1,200 manufacturers.

“How will Pakistan create jobs for its masses if imports continue to flourish under import-friendly policies?” Mr Allawala questioned.

Not only used car imports but also those of new vehicles have been rising. Imports of completely built-up units (CBUs), including new and used cars, surged by 40pc to $126 million during the first quarter of fiscal year 2026-27 (1QFY27), from $90m in 1QFY26, according to the Pakistan Bureau of Statistics.

New entrants are importing CBUs to test consumer response before beginning local assembly.

“Imports will continue to go up. The government is encouraging them through policy measures that promote the import of cars and parts,” Mr Allawala said. He added that Japanese cars assembled in Pakistan contained 50-65pc locally made parts, while Korean vehicles had 20-25pc and Chinese vehicles 0-5pc. “Huge quantities and value of parts that can be locally produced are also being imported,” he said.

‘Outflow of dollars’

Reacting to the new auto policy, PAAPAM Chairman Abdul Rehman Aizaz said it would also lead to a significant outflow of dollars through imports of CBU electric vehicles and 100pc completely knocked-down (CKD) kits for local assembly.

“It will also create a gap in FBR revenues with 5pc CBU duties on small EVs and especially low sales tax rates on EVs. Finally, it will facilitate used cars through commercial imports,” he added.

He said consumers, the 0.1pc of Pakistanis who buy cars every year, might see a 5-7pc reduction in prices due to tax cuts.

The biggest losers, he added, would be 1,200 domestic component manufacturing companies, their 300,000 direct employees and 1.5 million Pakistanis indirectly associated with the industry.

Assemblers would find it more feasible to import parts from foreign partners instead of buying them locally, resulting in a rollback of localisation, he said.

Other losers would be the State Bank, which would face a shortage of dollars to finance additional imports, and the FBR, which would suffer a significant shortfall in tax collection, Mr Aizaz said.

The component manufacturers disowned the policy, saying it was completely contrary to what had been agreed with the Ministry of Industries during consultations held until June 2026.

He said the policy had changed drastically between June and November, favo­u­r­ing imports over local manufacturing.

The component industry also considers the National Tariff Policy (NTP) flawed and based on an incorrect comparison of tariffs with other countries in the region.

“Applying the NTP to the auto sector is completely against regional peers, as India, Thailand and Indonesia apply CBU tariffs of 120pc, 80pc and 52pc, respectively, compared with the 15pc proposed in the auto policy,” Mr Aizaz said.

Published in Dawn, November 10th, 2026