KARACHI: The local automotive sector on Tuesday urged the government to rescind the recent reduction in completely built-up (CBU) tariffs and to ensure that any future tariff rationalisation follows a structured, time-bound roadmap developed in consultation with domestic stakeholders.
Under the tariff framework effective July 1, 2026, the protective delta between CBU imports and Completely Knocked-Down (CKD) assembly has been drastically halved, dropping from 35 percentage points to a mere 15 percentage points. The tariff on CBU, previously 50 per cent, has been reduced to 30 per cent, while the CKD tariff remains unchanged at 15 per cent for non-localised and 46 per cent for localised parts.
This sudden adjustment has created a severe structural anomaly where the tariff on a fully imported motorcycle is now significantly lower than the 46 per cent tariff levied on localised and locally manufactured components.
SM Ishtiaq, CEO of SM Engineering, an auto parts vendor, said erosion of this advantage threatened the entire vendor ecosystem, not just assemblers. He said CBU imports were a net drain on foreign exchange reserves, whereas local assembly, even of CKD kits, retained a significantly larger share of value within the domestic economy.He added that at a time of continued pressure on Pakistan’s current account, policies that substitute domestic production with finished imports were fiscally counterproductive.
Moreover, he said, a compressed delta disproportionately benefited foreign brands with established CBU supply chains while disadvantaging domestic assemblers who had invested in localisation, adding that this risked restructuring the competitive landscape in favour of imports, reversing years of deliberate industrial deepening.
Ishtiaq said the two-wheeler sector was the most accessible barometer of automotive industrial policy, so if cascading principles were abandoned here, it signalled to investors across the broader auto and engineering goods sectors that tariff frameworks were subject to abrupt reversal, significantly increasing the perceived policy risk of any long-term manufacturing investment in Pakistan.
This is particularly critical given that Pakistan’s two-wheeler sector is a massive economic pillar supporting over 500,000 direct and indirect jobs across original equipment manufacturers, vendors and retail networks, industry representatives said. This deep localisation has been painstakingly built over decades to exceed 85-90 per cent local content for established models, but the entire framework remains directly dependent on the tariff advantages that incentivise companies to source locally, they added.
