Car prices likely to go down in upcoming budget

Pakistan is set to introduce significant tax reductions on vehicles and auto parts in the 2025-26 federal budget, potentially lowering car prices for consumers after years of steep inflation, according to government sources.

The proposals include:

• A 20% reduction in customs duties (currently 15-90%) on imported vehicles

• Complete removal of the 2% additional customs duty on auto parts

• Phased decreases in 4-7% duty slabs for industrial raw materials covering textiles, chemicals, and steel

The budget, scheduled for presentation around June 2, is being finalized during ongoing negotiations with the International Monetary Fund (IMF) under Pakistan's current loan program. Officials are working on a Rs14.3 trillion tax target, with Rs600 billion expected from improved tax compliance and Rs400 billion from new revenue measures.

"The duty reductions aim to boost the auto industry while providing relief to middle-class buyers," a Finance Ministry official stated, requesting anonymity as discussions continue.

The IMF has emphasized the need for better economic documentation to widen Pakistan's tax base but appears supportive of sector-specific reforms to stimulate growth. If approved, analysts say the changes could make vehicles 10-15% cheaper, though final impacts depend on global supply chains and currency stability.

Read: Pakistan sees 40% rise in car sales in first 10 months of FY2025-26

The auto sector, which saw sales drop 40% last year due to high prices, has welcomed the proposed reforms. "This could revive consumer demand," said an industry representative.