Duty Cut on Import of Cars Likely in Pakistan

Under the new automobile policy under Automobile Industry Development Program(AIDB) the government of Pakistan is consideration a cut in CBU import duty on new cars and LCVs by broadly 5-15%.

If the new move comes into practice it would be reducing the CBU-CKD differential for 800cc- 1000cc cars and LCVs, hence making it cost effective for buyers to import cars instead of bearing the cost of CKD and assembling thus posing a threat to development of the local automobile industry.

In addition, what could potentially further affect demand for local sales is the proposal in the new AIDP which suggests another cut in non-localized CKD duty from current 32.5% to 20% and fix it for next 5 years.

The cut in duty on import of new cars may also attract the present manufacturers or assemblers to switch over on imports affecting the industrial base of the auto sector which already performing under capacity due to various factor including fuel price hike, increase in car prices as well as ban on CNG kits.

The decline in sales number especially of economy class is attributable to the impact of ban on CNG vehicles coming into play as Pakistan Suzuki has stopped booking of CNG cars.