EDITORIAL: Why is govt reluctant to close loopholes in used-car import segment?

EDITORIAL: The government seems reluctant to close the loopholes in the used-car import segment. Policymakers had earlier decided to end used-car imports under the personal baggage scheme, which had been grossly misused.

However, the government has now decided to continue the scheme, albeit with tighter conditions, which are likely to be misused again. This effectively takes us back to square one.

A decade ago, there was a rationale for allowing used-car imports because domestic consumers had limited choices, with only three assemblers dominating the market. Today, after changes in auto policies, consumers have a wide range of choices for new cars, most of which are locally assembled.

There are now around a dozen automobile assemblers in Pakistan, and a new model is introduced almost every month. There was a time when outdated models dominated the market; today, the latest international models are available in Pakistan at competitive prices. This has triggered a price war with many players cutting prices as newer models enter the market at lower prices with better specifications.

A decade ago, almost every car sold at a premium for spot delivery. Today, not only are most cars available without any premium, but sellers are also offering attractive monthly instalment plans for payment.

READ MORE: Used car imports cost auto-parts sector up to Rs60bn yearly

Consumers are now spoiled for choice, while assemblers’ margins are thinning as they compete for market share in an economy that is not growing due to falling purchasing power and higher taxes and duties.

At the same time, the government is opening used-car imports through formal channels against payment 40 percent regulatory import duty to protect the local assemblers—a move that makes a greater sense.

However, the continuation of controversial imports under the personal gift scheme is completely unjustified.

Such schemes have always been misused, with almost all imports conducted by commercial traders. There is no legal mechanism to make payments through the formal banking system, so transactions are conducted through the illegal hundi–hawala network; and this will continue if the scheme remains. This is happening even as the government and the SBP (State Bank of Pakistan) are cracking down on hundi–hawala.

Exchange companies (ECs) are being scrutinised, and many dubious ones have been shut down, helping trade flows move into formal channels. As a result, home remittances have shown an exceptional growth.

The government should end these practices altogether, as payments for used-cars are effectively netted off through remittances or via over- and under-invoicing of exports and imports. At a time when the country is struggling to build foreign-exchange reserves and banks are tightening import L/Cs, such leakages are damaging.

The government should support formal players and give space to new auto assemblers and parts manufacturers by ending these schemes, which place unnecessary pressure on the balance of payments and give commercial importers an unfair advantage over local producers.

Copyright Business Recorder, 2026