Pakistan to cut auto tariffs over 5 years, eyes car exports after tractors and motorcycles

A BYD ATTO 3 electric vehicle is displayed at the BYD Pakistan Metropole Experience Center, in Karachi, Pakistan July 23, 2025. (Reuters/File)
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Updated 13 August 2025
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Pakistan to cut auto tariffs over 5 years, eyes car exports after tractors and motorcycles

  • Commerce minister forms committee with key ministries to address auto industry challenges
  • US tariff reduction deal seen as creating new opportunities for Pakistani auto exports

ISLAMABAD: Pakistan will gradually cut tariffs on the auto sector over the next five years and work on a strategy to expand exports, Commerce Minister Jam Kamal Khan told industry representatives on Wednesday, as the government seeks to strengthen the local market and boost overseas sales.

Khan met auto industry stakeholders in Islamabad and announced the formation of a committee, comprising officials from the Commerce Ministry, the Federal Board of Revenue and the Ministry of Industries, to address sector challenges. The minister invited the industry to participate in the upcoming industrial policy and said healthy competition was increasing in Pakistan’s auto market.

“After tractors and motorcycles, we will now also export cars,” Khan said, adding that the government would prepare “a strategy for the development and exports of the auto sector” and that tariffs “will be gradually reduced over the next five years.”

Khan said imported used cars should meet quality and environment-friendly standards and linked new export prospects to a recently signed US tariff reduction agreement. Under the deal, Washington has cut import duties on Pakistani goods to 19 percent, a move the government says will improve competitiveness for products including automobiles. 

“The tariff reduction agreement with the US has created new opportunities for auto exports,” the minister said.

Industry representatives told the meeting that new technologies had increased production costs, and urged protection for local manufacturers from the import of used vehicles.

Pakistan’s automobile industry is one of the fastest-growing sectors, contributing around 7 percent of Large Scale Manufacturing (LSM) and accounting for 7–16 percent of the manufacturing GDP depending on the metric used. It employs millions, and local assembly is dominated by established players like Honda, Toyota, Suzuki, Hyundai, Kia, and newcomers such as MG and Haval.

The market includes motorcycles, tractors, cars, and commercial vehicles, but remains highly concentrated among a few brands.

The fiscal year 2025–26 budget introduced several changes impacting the auto industry. A new Green Tax was applied to internal combustion engine vehicles, ranging from 1 percent to 3 percent of vehicle value depending on engine size and origin .

The industry also flagged an imbalance in GST rates — 8.5 percent on hybrid electric vehicles versus 18 percent on fully electric vehicles — raising concerns over a policy disconnect with the Automotive Industry Development and Export Policy (AIDEP) 2021–2026 provisions.

Experts warn that high taxes, policy uncertainty, and weak industrial support were curbing demand. Recent vehicle sales dropped 49 percent month-on‑month in July 2025, partly due to pre-budget rushes and subsequent tax adjustments  .

The sector also faces structural challenges including limited localization of parts, high production costs, and fragile capacity utilization (around 24 percent). Policy instability, particularly regarding tariff reductions and fiscal incentives, risks discouraging investment, and experts say long-term industrial support is necessary to prevent local manufacturing decline.

Inflation, currency volatility, and macroeconomic uncertainty further weigh on consumer demand and financing.


Pakistan joins regional talks on Afghanistan in Iran as Kabul stays away

Updated 15 December 2025
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Pakistan joins regional talks on Afghanistan in Iran as Kabul stays away

  • China, Pakistan, Pakistan, Tajikistan, Uzbekistan, Turkmenistan all joined talks organized by Iran, as did Russia
  • Afghanistan was invited but decided not to attend, Taliban-led government was tight-lipped on the reasons

TEHRAN, Iran: Afghanistan’s neighbors met in Iran and agreed to deepen regional coordination to address political, economic and security challenges, as well as calling for sanctions on Afghanistan to be lifted. 

The only absent party? Afghanistan itself.

China, Pakistan, Pakistan, Tajikistan, Uzbekistan and Turkmenistan all joined the talks organized by Iran, as did Russia, according to a statement released after the meeting on Sunday.

Afghanistan was invited but decided not to attend. Its Taliban-led government was tight-lipped on the reasons, with the foreign ministry saying only that it would not participate because Afghanistan “currently maintains active engagement with regional countries through existing regional organizations and formats, and has made good progress in this regard.”

The statement from the talks in Iran stressed the importance of maintaining economic and trade ties with Afghanistan to improve living conditions and called for the country’s integration into regional political and economic processes.

The Taliban were isolated after they retook power in Afghanistan in August 2021, but in the past year, they have developed diplomatic ties. They now raise several billion dollars every year in tax revenues to keep the lights on.

However, Afghanistan is still struggling economically. Millions rely on aid for survival, and the struggling economy has been further impacted by the international community not recognizing the Taliban government’s seizure of power in the wake of the chaotic withdrawal of US-led troops in 2021. Natural disasters and the flow of Afghans fleeing Pakistan under pressure to return home have underlined Afghanistan’s reliance on foreign aid to meet essential needs.

The countries at the talks also voiced security concerns and pledged cooperation in combating terrorism, drug trafficking and human smuggling, while opposing any foreign military presence in Afghanistan. They underscored the responsibility of the international community to lift sanctions and release Afghanistan’s frozen assets, and urged international organizations to support the dignified return of Afghan refugees from neighboring countries.

The participants backed efforts to reduce tensions between Afghanistan and Pakistan, which have been particularly strained, with border clashes between the two sides killing dozens of civilians, soldiers and suspected militants and wounding hundreds more.

The violence followed explosions in Kabul on Oct. 9 that Afghan authorities blamed on Pakistan. A Qatar-mediated ceasefire has largely held since October, although there have been limited border clashes. The two sides failed to reach an overall agreement in November despite three rounds of peace talks.

Asif Durrani, Pakistan’s former special representative for Afghanistan, said the Taliban government’s decision to skip the meeting reflected a “lack of political maturity.” 

Writing on X, Durrani said the move reinforced concerns that the Taliban were unwilling to negotiate, instead adopting an “I don’t accept” stance that he said would do little to resolve serious regional problems.

Mohammad Sadiq, the current Pakistani special representative for Afghanistan who attended the talks, wrote on X that the Afghan people had already suffered enough and deserved better.

Only an Afghanistan that does not harbor militants would inspire confidence among neighboring and regional countries to engage meaningfully with Kabul and help unlock the country’s economic and connectivity potential, he wrote.

Participants agreed to hold the next meeting of foreign ministers of Afghanistan’s neighboring countries as soon as possible in Ashgabat, Turkmenistan, and welcomed Pakistan’s offer to host the next round of special envoys’ talks in Islamabad in March.

Iran’s foreign ministry spokesman, Esmail Baghaei, on Sunday said that the meeting had not been held for about two years and marked the first such gathering attended by special envoys on Afghanistan from neighboring countries as well as Russia. Russia and Uzbekistan sent the special envoys of their presidents, while Pakistan was represented by a delegate from the prime minister’s office.

Landlocked Afghanistan is sandwiched between the Middle East, Central Asia, and South Asia, making it strategically located for energy-rich and energy-hungry nations.