Chairman LMC Urges Caution on Tariff Rationalization, Citing Risks to Local Auto Industry and Economy

Islamabad, May 23, 2025 — Chairman of Lucky Motor Corporation (LMC), Mr. Muhammad Ali Tabba, met yesterday with the Federal Minister for Finance and the Special Assistant to the Prime Minister (SAPM) on Industries & Production to share his concerns regarding the government’s proposed Tariff Rationalization Plan, particularly the reduction of duties on Completely Built-Up (CBU) vehicles to 15% over a period of five years.

Mr. Tabba emphasized that while the intent behind tariff rationalization may be to make cars more affordable for customers, the proposal currently under consideration—if implemented without a well-thought-out approach—could have an adverse impact on Pakistan’s local auto industry, undermine investor confidence, and lead to a current account deficit.

He noted that under the Auto Development Policy (ADP) 2016–2021, Korean, European, and Chinese automakers entered the Pakistani automotive market with a cumulative investment of approximately USD 1.2 billion to establish local manufacturing plants. This initiative achieved key objectives, including offering more choices to consumers, fostering competition, and creating employment opportunities both in vehicle assembly and the auto parts manufacturing sector.

While expressing support for the government’s initiative to rationalize tariffs, Mr. Tabba stressed that a significant gap must be maintained between CBU and Completely Knocked-Down (CKD) duty rates in order to protect the domestic auto industry. He suggested that a consultation session be held with key stakeholders to determine the appropriate duty differential between CBU and CKD imports in order to safeguard the local auto industry.

In addition to tariff concerns, Mr. Tabba voiced his reservations about the potential liberalization of used car imports. He stated that Pakistan’s auto industry currently produces and sells around 150,000 units per year and hosts approximately 16 automobile brands—offering far more consumer choice than in the past. In this context, there is no justification for liberalizing used car imports. He also expressed concern over the government’s proposal to allow the commercial import of used cars, warning 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 would likely result in the depletion of FX reserves, a widening current account deficit, and further depreciation of the PKR.

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