Pakistan’s automotive industry has called on the government to abolish the used-car import schemes originally designed for overseas Pakistanis, arguing they have become a channel for large-scale misuse and undocumented trade.
The schemes, which allow imports under categories such as personal baggage, gifts, and transfer of residence, were introduced to support expatriates and supplement a domestic market constrained by limited production capacity, high prices, and restricted model choices.
Successive governments have revised the rules to manage foreign exchange pressures and shield local assemblers, but industry groups say loopholes continue to be exploited.
Shehryar Qadir, senior vice chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), said an estimated 40,000 used vehicles enter Pakistan annually under these provisions, each averaging Rs5 million.
He said the process, from purchase to sale, remains undocumented and fuels an estimated Rs200 billion black market.
“They have become a conduit for money-laundered transactions,” Qadir told Arab News. He said importers were buying passports of Pakistanis working in Japan and the Middle East, using their identities to pay for vehicles through hawala channels in Dubai.
Once imported, cars are cleared at subsidized and depreciated duty rates under SRO 577, then sold for cash through unregistered dealers without reporting to the Federal Board of Revenue.
PAAPAM says the domestic auto parts sector supports 1,200 suppliers, 1.8 million skilled jobs, and local production worth Rs300 billion, generating savings of $1.25 billion annually. Qadir warned that the misuse of import schemes undermines this ecosystem.
Pakistan’s commerce ministry did not immediately comment. Abdul Waheed Khan, director-general of the Pakistan Automotive Manufacturers Association (PAMA), which represents major assemblers including Toyota, Honda, Suzuki, Hyundai, Kia, and Changan, acknowledged the problem.
“We keep telling the government in different letters, but we have not yet seen any action taken against it,” he said.
The concerns come weeks after the International Monetary Fund, in its Governance and Corruption Diagnostic Assessment, highlighted weaknesses in Pakistani institutions and issued a 15-point recommendation list aimed at addressing corruption risks.
Pakistan’s performance under the IMF’s $8.4 billion loan program is due for review on December 8, with a $1.2 billion tranche at stake.
Economist Muhammad Waqas Ghani said misuse of the schemes is a growing challenge. The government, he added, is tightening rules in line with IMF requirements.
The Economic Coordination Committee recently approved new conditions for used-car imports, including a proposal to raise the minimum overseas stay requirement from six months to three years, require a cumulative stay of 850 days, and make imported vehicles non-transferable for one year.
Ghani said such measures could help the local industry and curb foreign exchange leakages. “Currently, they pose a threat not only to the local auto industry but also lead to outflow of crucial foreign reserves,” he said.
A used-car importer, speaking anonymously, rejected claims of misuse. He argued that expatriates are free to sell their import privileges if they do not use them, and said imported used vehicles help maintain competition and prevent monopolies by local assemblers.
“If the government bans used car imports, they will have a monopoly over prices. You will see the ‘own money’ system coming back,” he said, referring to premiums paid for quicker delivery of local vehicles.
He added that commercial import rules technically exist but cannot operate due to Pakistan’s shortage of dollars. According to State Bank data, foreign exchange reserves have remained near $14 billion since July.
Analyst Myesha Sohail of Topline Securities said the alleged black market is not significantly affecting the auto industry at present.
She noted that more buyers are shifting toward formal channels due to improved economic stability and government facilitation measures. Car sales from July to October rose 40% to 42,831 units, compared with 30,625 units a year earlier, PAMA data shows.
“People are preferring formal means. Else, we wouldn’t have seen the growth,” she said.
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