KARACHI: Pakistani automotive industry stakeholders on Thursday urged the government to scrap the "ill-regulated" used car import schemes which were meant to facilitate overseas Pakistanis, saying they are being misused by some “unscrupulous importers.”
Pakistan’s government has long relied on used car import schemes to supplement the domestic auto market, where production constraints, limited model variety, and high prices often restrict consumer choice.
However, successive governments have periodically tightened or revised these schemes to manage foreign exchange pressures and protect local assemblers.
These schemes, typically framed under categories such as personal baggage, gift, or transfer of residence, allow overseas Pakistanis to bring in used vehicles under regulated conditions. While intended to facilitate expatriates and bridge supply gaps, the policies have also shaped the broader automotive landscape by influencing availability and pricing in the local market.
Shehryar Qadir, senior vice chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), said on Thursday some unscrupulous importers were damaging the industry by misusing the schemes, adding that around 40,000 vehicles, each valuing Rs5 million ($17,700) on average, land in Pakistan every year though the schemes are not meant for commercial activity.
“The entire process of purchase, import and sale of imported used cars is undocumented and valued at Rs200 billion ($713 million) a year in black market transactions,” Qadir told Arab News.
“They (schemes) have become a conduit for money-laundered transactions.”
Pakistan’s auto parts sector alone binds together 1,200 different suppliers, supports 1.8 million skilled jobs and anchors local production worth Rs300 billion ($1.1 billion) and $1.25 billion per year in savings, according to PAAPAM data.
Qadir said the importers were buying passports of Pakistanis working in Japan and the Middie Eastern countries and using their credentials to pay for the purchase of used cars.
“Payments for these purchases are made through Hawala channels via Dubai,” he said.
The vehicles, once in Pakistan, are cleared on an overseas Pakistani’s passport upon payment of subsidized and depreciated custom duties under the Statutory Regulatory Order (SRO) 577, according to the PAAPAM official.
After clearance from customs and port authorities, the cars are sold through a network of unregistered used car dealers with payments taken in cash without any reporting to the state-run tax collector, the Federal Board of Revenue (FBR).
“This has become a huge parking lot for untaxed black money,” Qadir claimed.
Arab News reached out to Pakistan’s commerce ministry spokesperson Naveed-ul-Haq Kallu but he was not available immediately for a comment on PAAPAM’s claims.
Abdul Waheed Khan, director-general at the Pakistan Automotive Manufacturers Association (PAMA), did not deny when asked if the government-backed schemes had really created a multimillion dollars “black market.”
PAMA represents Toyota, Honda, Suzuki, Hyundai, Kia Motors, Changan Automobile and other manufacturers and assemblers who operate in Pakistan.
“We keep telling the government in different letters, but we have not yet seen any action taken against it,” Khan told Arab News.
PAAPAM’s claims surface weeks after the International Monetary Fund (IMF), in its Governance and Corruption Diagnostic Assessment (GCDA), pointed out governance weaknesses in Pakistani state institutions and urged prioritizing a 15-point set of recommendations to address these issues tied to a heightened risk of corruption.
The IMF’s executive board is scheduled to meet on Dec. 8 to review Pakistan’s performance under its $8.4 billion extended fund and resilience and sustainability loan facilities. A successful review will see the lender release a $1.2 billion tranche to Pakistan.
Economist Muhammad Waqas Ghani says the misuse of used car imports has become a major concern for the local auto industry.
“This issue stems from the misuse of schemes meant for overseas Pakistanis to import used vehicles,” said Ghani, head of research at the Karachi-based JS Global Capital Limited brokerage firm.
He said the government is tightening these schemes in line with the “IMF demands.”
In Sept., Pakistan’s top economic decision-making body, the Economic Coordination Committee, approved the import of used cars and proposed new and tighter rules in line with the IMF’s requirement to liberalize trade.
“While the current rule requires a minimum overseas stay of six months [for a Pakistani national to import a used car], the commerce ministry has proposed raising this to three years, with a cumulative stay of 850 days, and making imported vehicles non-transferable for one year,” Ghani told Arab News.
He said the government’s proposals, if implemented successfully, would benefit the local auto industry.
“Currently, they pose a threat not only to the local auto industry but also lead to outflow of crucial foreign reserves,” Ghani said.
An importer of used cars, who wished not to be named, denied any “misuse” of these schemes and said the import of such cars was a way to keep a “check on local assemblers as well as compete them.”
“This is not a misuse as the government has given a facility to the overseas Pakistanis to import a vehicle in a two-year period but if an overseas Pakistani doesn’t avail this facility and sells his scheme to someone else, it is no misuse,” he told Arab News.
“The government gets its revenues while the country receives remittances. It’s all beneficial for Pakistan.”
The importer said there will be monopoly of local assemblers in Pakistan, if the government bans used car imports.
“They will have monopoly over prices in the absence of a competition. You will see the ‘own’ system coming back,” he said, referring to ‘own money’ or premiums paid for locally assembled vehicles readily available to buyers in Pakistan.
“When the annual import volumes of used cars used to stand at, say 25,000 units, people would wait for months to get the delivery of [locally assembled vehicles].”
He said although the government has allowed commercial imports of used cars but has not practically little in this regard.
“The way the government has opened commercial imports nobody would be able to make any imports as the biggest problem they would face would be the availability of foreign exchange,” the importer said.
“The government doesn’t have enough dollar reserves to pay for the commercial import of vehicles.”
According to the State Bank of Pakistan (SBP) data, Pakistan’s foreign exchange reserves have been hovering around $14 billion since July despite the government’s efforts to increase them.
But Myesha Sohail, an automobile analyst at Topline Securities Limited, said the alleged black market was not affecting the auto industry and economy lately.
“Black market is always there in every industry, you can’t gauge how big or small it is compared to years earlier,” the analyst told Arab News.
She, however, said that Pakistani buyers were staying away from the black market and switching to official means, amid the government’s measures to facilitate transactions through formal channels.
From July till October, Pakistan’s car sales rose 40 percent to 42,831 units from 30,625 units a year earlier, according to PAMA data.
Sohail said economic stability and growing demand in the auto market were pushing people toward formal means.
“Else, we wouldn’t have seen the growth,” the analyst added.
