Used cars for expats: ECC will consider MoC proposal to cease 2 schemes
ISLAMABAD: The continued influx of used cars into Pakistan’s market is driven more by the exploitation of loopholes in the generous baggage concessions granted to expatriates and returning Pakistanis than by any deliberate or well-thought-out state policy.
The Economic Coordination Committee (ECC) of the Cabinet, headed by the Finance Minister Muhammad Aurangzeb, will consider a proposal of the Commerce Ministry to discontinue at least two schemes of three-year-old cars meant for the overseas Pakistanis.
A report prepared by H2 Consulting and shared with relevant authorities, including the Commerce Ministry, highlighted that this uncontrolled exposure distorts industrial planning efforts, floods the market with substandard goods, and fuels a mafia that thrives on Hawala-Hundi transactions to finance imports, thereby depriving local industries of their rightful chance to grow.
Used cars’ scheme for overseas Pakistanis: ministry facing ‘ifs and buts’ situation
The report further states that rampant underinvoicing leads to significant tax revenue losses for the national exchequer, while consumers end up purchasing ‘imported’ vehicles that may look shiny on the outside but are likely to have major underlying issues.
In Pakistan, when consumers purchase used imported vehicles — over 90 percent of which come from Japan — they are essentially taking a gamble.
“They might get lucky and have the car run without trouble for many years, or it may break down the very next day and be worth no more than scrap metal,” the report cautioned.
While the government may be exploring other avenues to meet consumer demand for affordable and reliable mobility, the report argues that flooding the market with questionable used vehicles is not the solution for several reasons.
The foremost reason is the urgent need to curb the migration of vehicles from developed countries like Japan to Pakistan. It is well documented since 2022 that Pakistan is among the countries most severely affected by climate change, despite bearing no responsibility for it. Therefore, every future policy must prioritize environmental sustainability.
“Although local manufacturers present certain challenges to consumers, the import of used vehicles has not served the consumers’ best interests,” the report emphasizes. One of the major issues is the uncertainty regarding vehicle specifications — the consumer often receives a vehicle described by what it might be, rather than what it actually is.
Additionally, the lack of maintenance history means severely damaged vehicles may be imported, leaving consumers unaware of the true condition of their purchase. “Moreover, spare parts for these vehicles are expensive and must also be imported. Even if the consumer manages to procure the necessary parts, local technicians often lack the expertise required for proper maintenance, resulting in substandard repairs,” the report explained.
To address these challenges, the report recommends that the government incentivize local manufacturers by lowering tax slabs for similarly sized vehicles and offering additional support for technological advancements, enabling better market competition.
“Like all industries, the automotive sector significantly contributes to the GDP and provides employment opportunities for Pakistanis. While the industry’s progress may not be as rapid as desired, it cannot be overlooked,” the report concluded.
“It is understandable that the government may reconsider unconditional support for the industry. However, abandoning it altogether and risking severe environmental consequences is not a choice that should be made,” it warned.
Copyright Business Recorder, 2025