Budget 2026-27: Proposed Tariff Cuts for Imported Cars in Pakistan

Budget 2026–27 is around the corner and Pakistan’s automobile industry is facing heightened uncertainty, with proposed policy shifts expected to reshape pricing dynamics across multiple vehicle segments. Market conditions, including subdued demand and existing inventory levels, are also likely to limit any rapid transmission of cost changes to consumers in months to come. Sweeping tariff reform proposals remained in focus as they could axe duties on imported vehicles while simultaneously altering the tax structure for hybrid and electric cars. Under the anticipated Phase 2 tariff reform framework, policymakers are reportedly considering substantial cuts in duties on imported vehicles in an effort to widen consumer choice and challenge pricing structures in the local assembly market. According to proposals under discussion, customs duty could be reduced from approximately 100 percent to 50 percent, while regulatory duty may be lowered from 50 percent to 20 percent. This would bring the overall cumulative tariff burden down from around 150 percent to nearly 70 percent. If implemented, the move would represent one of the most significant reductions in import taxation in recent years, potentially lowering landed costs for Japanese used imports (JDMs) and completely built-up (CBU) vehicles. Industry observers caution, however, that such a shift could also trigger a correction in the used import market, with resale values expected to decline by an estimated 10 to 15 percent as pricing adjusts. On the other hand, locally assembled hybrid and electric vehicles may face a less favorable outlook. Reports suggest that fiscal negotiations, influenced by broader revenue targets and external financial conditions, include proposals to rationalize existing tax concessions on “green” vehicles. As of May 2026, electric vehicles are subject to a nominal 1 percent GST, while hybrids are taxed at approximately 8.5 percent. However, under proposed changes, both categories could be