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Express Tribune
a day ago
- Automotive
- Express Tribune
Auto sector divided on new budget
Listen to article Auto sector experts and consultants expressed serious reservations about the finance minister's budget speech and called for reviewing the federal budget before seeking approval from the National Assembly (NA). Talking to The Express Tribune, Auto Sector Expert Mashood Khan said the finance minister's budget speech closely mirrors the International Monetary Fund's (IMF) recommendations. The downward trend in additional customs duty, regulatory duty and customs duty will likely hit local manufacturing instead of exports in the future. Severe consequences for the local manufacturing industry may be predicted and witnessed. Without a thriving domestic industry, the import bill will surge, and foreign reserves will take a hit. The auto parts and other manufacturing sectors will face major challenges. It is unclear how exports will increase without a robust local industry. "I urge the federal finance minister to revisit the budget before seeking approval from the National Assembly. Without a supportive industrialisation policy, local manufacturing will struggle, and exports will suffer," he said. Moreover, Economic Strategist and Regional Expert Dr Mehmoodul Hassan Khan said the pledges for the creation of effective incentives and essential tax exemptions for the adoption and use of electric vehicles (EVs), contributing to the national goal of 30% penetration for new passenger EV sales and 50% for two- and three-wheelers by 2030, represent a paradigm shift towards a massive green transformation. Additionally, reducing taxes on five-year-old vehicles is a step in the right direction, making imports more affordable, which would provide some much-needed financial relief to common consumers in the country. The introduction of a holistic and comprehensive reform package, mainly gradually phasing out additional customs duty on vehicles and reducing regulatory duties, will also be beneficial for the local auto industry, creating a strategic balance between local and imported automobiles. The government's recommendation that no new regulatory duties be imposed on the auto sector and its proposal for an annual 10% reduction in tariffs on used vehicles is a constructive step having multiplier effects. The easy and smooth mechanism of issuance of licenses to 57 EV manufacturers for the production of two- and three-wheeler electric vehicles vividly reflects the strategic priority of the government in reducing carbon footprints and inching towards carbon neutrality. Meanwhile, contrary to the above-cited views, another leading automobile consultant and expert, Shafiq Ahmed Shaikh, said: "In my opinion, the federal budget is good and balanced. With reference to the auto sector, the recommended National Tariff Programme with the plan is good for Pakistan and a requirement of today. As I foresee, by gradually lowering import duties, in the future it will not only stabilise the local and international markets but also have to be competitive with the global industry." He said under the proposed tariff, the duties would come down to 15% from the current 20% over five years, whereas additional customs duty and regulatory duty will also be phased out. The government also plans to eliminate the Fifth Schedule and lower the maximum slab rate to 15%. This is a good overhauling of the trade regime and will definitely foster export-led growth. This was also the requirement of the IMF, which seeks to bring Pakistan's tariff structures in line with global norms. Now, through revolutionary changes, not only will policy stabilisation come, but easy access to international supply chains will also be opened. "At present, this sector contributes around 4% of total tax revenue. I foresee that by taking the tariff rationalisation route, more revenue will be generated," he said.
Business Recorder
2 days ago
- Automotive
- Business Recorder
Budget 2025-26: auto sector faces mixed fortunes amid tariff reforms, carbon tax
Pakistan's auto sector navigated a complex landscape following the announcement of the federal budget for 2025-26, as Finance Minister Muhammad Aurangzeb unveiled a raft of tariff reforms aimed at aligning with global trade norms and International Monetary Fund (IMF) recommendations. While the government touts these reforms as steps toward export-led growth and trade liberalisation, industry stakeholders are voicing concerns about the adverse impact on local manufacturing. Under the new budget, Additional Customs Duty (ACD) and Regulatory Duty (RD) are set to be reduced to zero by 2030. The fifth schedule will be eliminated, and Customs Duty (CD) will be capped at 15%. Budget 2025-26: Pakistan targets 4.2% growth as Aurangzeb presents proposals 'for a competitive economy' It will be reduced to zero percent by 2030. These changes, according to the government, are part of a long-term National Tariff Programme aimed at boosting exports and ensuring smoother access to global supply chains. However, domestic players fear the reforms could weaken Pakistan's already fragile local manufacturing base. 'The new carbon tax will increase vehicle prices, while reduced RD on imported cars will make them cheaper — making imports more attractive and local manufacturing less competitive,' a senior official from a local car manufacturing company said. Meanwhile, Mashood Khan, an auto sector expert, warned that the reforms reflect IMF directives rather than domestic industrial priorities. 'The downward trend in ACD, RD, and CD will likely hit local manufacturing instead of boosting exports. Without a thriving domestic industry, our import bill will rise and foreign reserves will suffer,' he said, urging the finance minister to revisit the policy before parliamentary approval. Khan added that auto parts and related industries would face significant challenges without a clear strategy to support industrialization. 'It's unclear how exports will grow without strengthening the local base,' he noted. Offering a more optimistic view, Shafiq Ahmed Shaikh, an automobile consultant and former Pak Suzuki official, welcomed the overhaul. 'This is a good move. A gradual reduction in duties will help Pakistan integrate with global markets and secure better FTAs and PTAs,' he said. He noted that duties could fall from 20% to 15% over the next five years and emphasised that aligning tariffs with international norms would bring policy stability and encourage export-oriented investments. However, Shaikh cautioned that the removal of the 12.5% concessional sales tax on vehicles under 850cc would hurt lower- and middle-income consumers. The standard 18% sales tax will apply, increasing prices of small hatchbacks. Pak Suzuki, which leads the market in this segment due to its Alto 660cc, will be most affected. Aurangzeb defended the move, arguing that automakers were not passing on the tax benefit to consumers, making the concession ineffective. Key highlights of Pakistan budget for 2025-26 Osama Naeem, an auto analyst at AKD Securities, said, 'RD on vehicles above 3,000cc will be slashed from 90% to 50%, but details for lower engine sizes are awaited. This reduction in RD will hurt local assemblers who face competition from cheaper imports.' He further said the ACD cut would impact imported completely built units (CBUs) more than local manufacturers, as the latter apply it primarily on parts and raw materials.
