LMC raises concerns over tariff rationalization plan

May 23, 2025 (MLN): The government’s proposed Tariff Rationalization Plan includes reducing duties on Completely Built-Up (CBU) vehicles to 15% over five years.

Chairman of Lucky Motor Corporation (LMC), Mr. Muhammad Ali Tabba, discussed this plan during a meeting with the Federal Minister for Finance and the Special Assistant to the Prime Minister on Industries & Production.

Mr. Tabba emphasized that while the intent behind tariff rationalization may be to make cars more affordable for customers, the current proposal could have negative effects if implemented without a well-thought-out approach.

He warned it could adversely affect Pakistan’s local auto industry, undermine investor confidence, and lead to a current account deficit, according to the press release issued.

He noted that under the Auto Development Policy (ADP) 2016–2021, Korean, European, and Chinese automakers invested approximately $1.2 billion to establish local manufacturing plants.

This initiative achieved key objectives such as offering more consumer choices, fostering competition, and creating employment in vehicle assembly and auto parts manufacturing.

While supporting the government’s tariff rationalization initiative, Mr. Tabba stressed the need to maintain a significant gap between CBU and Completely Knocked-Down (CKD) duty rates to protect the domestic auto industry.

He suggested holding a consultation session with key stakeholders to determine the appropriate duty differential between CBU and CKD imports.

Mr. Tabba also voiced concerns about the potential liberalization of used car imports.

He stated that Pakistan’s auto industry currently produces and sells around 150,000 units annually and hosts approximately 16 automobile brands, offering more consumer choices than before.

In this context, he said there is no justification for liberalizing used car imports.

He warned against the government’s proposal to allow commercial import of used cars, cautioning that such a policy could turn Pakistan into a “junkyard” of second-hand vehicles.

Given Pakistan’s fiscal constraints and limited foreign exchange reserves, Mr. Tabba concluded that a liberal import and tariff regime is unsustainable and could deplete foreign exchange reserves, widen the current account deficit, and further depreciate the Pakistani rupee.

In response, the Special Assistant to the Prime Minister on Industries and Production assured Mr. Tabba that the government values industry input and will consult all stakeholders before finalizing decisions on tariff rationalization and used car import policies.

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