LAHORE: The local automotive parts manufacturing industry has criticised the Federal Board of Revenue’s (FBR) new tariff framework, saying the changes introduced in it will raise production costs, weaken incentives for localisation and create uncertainty for more than 2,000 auto parts vendors.
Under the revised tariff regime notified through SRO 693, the protective gap between duties on completely built unit (CBU) vehicle imports and completely knocked-down (CKD) kits has been reduced from 35 percentage points to 15 percentage points. The duty on CBU imports has been cut from 50 percent to 30pc while CKD duties remain unchanged at 15pc for non-localised parts and 46pc for localised parts.
Industry representatives argue that the revised duty structure increasingly favours imports over domestic production by making imported CBUs and commercially imported parts relatively cheaper than the CKD kits used for local assembly.
“SRO 693 was meant to promote localisation by imposing higher duties on imported parts in line with the Auto Industry Development and Export Policy (AIDEP),” says Ishtiaq Hussain Siddiqui, an auto parts manufacturers’ representative. “Instead, it has created policy uncertainty and cost disadvantages for vendors employing tens of thousands of workers. We cannot absorb policy uncertainty or cost increases.”
According to Siddiqui, the chief executive of SM Engineering, rationalising the cascading tax burden and restoring a meaningful tariff differential between CBU imports and CKD kits are essential for building a competitive, export-oriented auto industry.
“These are not concessions to a protected industry, but the minimum conditions needed to convert four decades of manufacturing capability into a technologically competitive, export-oriented sector, instead of sacrificing it for a modest, one-time reduction in showroom prices.”
He argues that Pakistan’s automobile industry has long been burdened by heavy, multiple taxes, including customs duty, additional customs duty, regulatory duty, federal excise duty and sales tax, along with one of the highest corporate tax rates in the world.
“It is this cumulative tax structure -- more than tariff protection itself -- that has kept vehicle ownership among the lowest in the region and pushed most Pakistanis out of the formal new-car market.”
The government plans to reduce the maximum tariff on CBU imports to 15pc and bringing Pakistan’s weighted average tariff down to around 6-7pc by 2030.
“That is precisely the problem. Without a credible localisation framework, tariff liberalisation loses its policy rationale,” Siddiqui says, adding that industry associations have been warning for more than a year that tariff reforms without safeguards for domestic manufacturing will undermine investment in local auto parts manufacturing.
Published in Dawn, July 14th, 2026