In recent years, Pakistan’s automobile industry has been facing a growing concern over the increase in imported second-hand vehicles from China. Indus Motor Co., a joint venture of Toyota in Pakistan, expressed serious concerns about this trend, labeling it as a direct threat to their business operations.
According to Ali Asghar Jamali, the CEO of Toyota’s joint venture in Pakistan, the past year up to June has seen a surge in imported second-hand vehicles to a range of 40,000 to 45,000 units, constituting nearly one-third of the domestic automotive market, a sharp rise from less than 10% in 2023.
Jamali stated in a press release, “This poses a significant threat to the local manufacturing industry and puts pressure on the country’s foreign exchange reserves.”
Representatives from Pakistan’s automotive industry issued warnings during a joint meeting of the Senate’s Finance and Revenue Standing Committee and the Industries and Production Standing Committee on Monday. They noted that the domestic automotive sector is on the brink of collapse due to the current tax structure and recent reductions in regulations for imported second-hand vehicles, which have severely impacted new car sales, hindering industry growth.
Industry representatives cautioned that further relaxation of policies on second-hand vehicle imports would jeopardize the survival of the domestic automotive sector, potentially leading to over 2 million job losses and endangering yearly revenues of Rs. 878 billion (approximately $3.1 billion) and tax revenues of Rs. 302 billion (about $1.07 billion).
The measures to ease restrictions on second-hand vehicle imports are part of the International Monetary Fund’s (IMF) $7 billion loan program aimed at assisting Pakistan in economic recovery.
Officials from the Ministry of Commerce stated that Pakistan has committed to gradually lifting restrictions on commercial imports of second-hand vehicles, initially allowing the import of cars less than five years old. Starting from the 2026 fiscal year, Pakistan’s tariffs on second-hand vehicles will be set at 40% higher than new cars. The tariff difference will be reduced by 10 percentage points each year until it is completely eliminated by 2030.
Local reports indicate that the Pakistan government is considering levying taxes to curb the influx of vehicles, a move believed to align with IMF requirements.
Most of Pakistan’s imported second-hand vehicles come from China, including a notable number of “zero-kilometer” cars. Chinese state media and social platforms feature reports of Chinese companies selling second-hand vehicles to Pakistan. For instance, Hubei Daily, the official media outlet of Hubei Province in China, reported on Pakistani traders engaging with a car company through e-commerce platforms like Alibaba to purchase 100 cars.
According to the Chinese Ministry of Commerce, China exported 275,000 second-hand cars in 2023. Vice Chairman Luo Lei of the China Automobile Dealers Association estimated that the export volume of second-hand cars from China reached around 400,000 units in 2024. Wang Meng, a consultant for the China Automobile Dealers Association, indicated that 90% of these second-hand cars are “zero-kilometer” vehicles.
“Zero-kilometer” cars refer to brand new vehicles purchased after receiving orders from foreign customers, which are exported as second-hand cars to corresponding countries. They are not only cheaper than domestically produced new cars but also have a competitive edge over used cars from other countries.
Some countries are concerned that the influx of Chinese automobiles may squeeze their local distributors, prompting them to take countermeasures. In 2023, Russia issued a government decree prohibiting brands with official dealerships in the country from selling “zero-kilometer” second-hand cars. Market regulatory bodies in countries like Jordan are adjusting the definition of used cars, requiring a longer period after registration or production before vehicles can be classified as second-hand.
Due to severe overcapacity in China’s automobile industry, which has long exceeded demand, the internal price wars have sparked accusations of China “dumping” cars overseas.
Despite the challenges, Ali Asghar Jamali, the CEO of the joint venture, remains cautiously optimistic about the future.
“This year is a cautiously optimistic period for both the Pakistani economy and our industry. While challenges persist, a broader macroeconomic environment is showing signs of stability, offering hope for a more robust foundation in the future,” he said.
Jamali mentioned that due to declining interest rates and inflation, coupled with the growing popularity of hybrid and electric vehicles, Pakistan’s domestic auto demand is expected to continue its recovery. He cited data from the Pakistan Automotive Manufacturers Association, indicating a 43% surge in sales of passenger cars and light commercial vehicles to nearly 148,000 units in the past year up to June.
He emphasized that future efforts would focus on “quality, safety, and the value provided to consumers.”
The latest half-year financial report of the car factory stated that with signs of economic stabilization, sales, revenue, and profitability have all shown robust growth. The company sold 34,000 vehicles in the first half of the year, marking a 56% year-on-year increase. The board announced a year-end dividend of 50 Pakistani rupees per share.