Auto Parts Sector Opposes Tax Relief For Luxury Cars, Urges Cut On Small Vehicles.
Representatives of the SME auto parts sector have expressed serious concerns over the reported proposal to provide tax relief on luxury vehicles costing more than PKR 10 million, at a time when the country remains under an International Monetary Fund (IMF) programme that requires difficult fiscal sacrifices from the wider population.
Instead, the industry has urged the Government to reduce sales tax on vehicles below 1000cc from 18% to 9%.
“The rationale is simple. Small cars serve the masses of our middle-class consumers. A tax reduction will directly benefit SME auto parts manufacturers by increasing production volumes and creating more job opportunities in the current economic situation. This is a win-win for both the industry and the Government,” said auto sector expert Mashood Khan.
Mashood Khan further highlighted the import burden, stating, “In the last one year we imported CKD/SKD kits amounting to $2.118 billion in FY26, and over the last 4 years this figure has reached USD 6 billion. This is not sustainable for a country that is currently in an IMF programme.”
The statement noted that policy focus has historically favored a few buyers in the high-end segment, which accounts for not more than a few thousand consumers. “On record, localization in the high segment for Chinese and Korean brands over the last ten years has been negligible and has not supported SME auto parts manufacturers,” Mashood Khan added.
The industry welcomed the Ministry of Industries’ focus under Mr. Haroon Akhtar on the growth of SME auto parts manufacturers in the upcoming Auto Policy, which was initially prepared in draft form by the Ministry.
“This raises fundamental questions about policy priorities. Should scarce fiscal space be used to reduce the tax burden on luxury vehicles when millions of Pakistanis continue to bear the cost of economic adjustment?” Mashood Khan questioned.
The auto industry also questioned the timing of the proposal. “At a time when every rupee of revenue matters and every concession carries a fiscal cost, reducing taxes on luxury vehicles sends a powerful message about policy priorities,” he said.
“Vehicles expected to benefit from this proposal are largely priced at PKR 10 million and above, placing them well beyond the reach of most Pakistanis. This creates the perception that while ordinary citizens continue to shoulder higher taxes, inflation, and reduced government support, tax relief is being extended to buyers of luxury vehicles,” Mashood Khan said.
“The Government may argue that the measure is intended to encourage cleaner transportation and accelerate the adoption of environmentally friendly technologies. That objective has merit. However, any commitment must include binding localization targets and a requirement to maintain at least one model in Pakistan for the next 5 years, without changing models every year,” Mashood Khan concluded.
