Govt Taxes Drive Car Prices in Pakistan Up by 40%, Says CEO Indus Motors

ISLAMABAD: Ali Asghar Jamali, CEO Indus Motors, has revealed that government taxes alone account for 38 to 40% of car prices in Pakistan, a major factor contributing to the soaring cost of vehicles in the country.

In a recent interview with a private news channel, Jamali said, “The on-road price of cars includes around 58 to 60% in taxes and charges. Out of this, 38 to 40% is directly taken by the government in the form of federal excise duty, CVT, income tax, custom duties, and other levies.”

“A car priced at Rs9 million includes not just the cost of production and parts, but layers of taxation — including 10% FED, 1% CVT, 8% income tax, and nearly 44% custom duty,” the CEO Indus Motors emphasized.

Jamali expressed concern that the excessive tax burden is discouraging buyers and making vehicles unaffordable for the middle class. He added that the automobile market has a potential size of 5.8 million, but it remains underdeveloped due to inconsistent policies and high costs.

“We’ve seen some improvement since January, but challenges persist for new entrants. The government now requires that all new models be localized and assembled locally, which is a positive move, but it must be backed by tax relief and policy stability,” he said.

In recent years, car prices in Pakistan have skyrocketed due to a combination of rising input costs, currency devaluation, and heavy taxation. These challenges, compounded by frequent policy changes, have slowed down the growth of the automotive sector and reduced the purchasing power of consumers.

Despite the ongoing slowdown in growth, industry analysts predict that traditional car prices may eventually drop  as the government moves to lower auto import tariffs under an IMF-backed trade liberalization plan.  The new policy, expected to be approved by June, aims to reduce tariffs on automobiles, bringing the average duty down to 5.6% by 2030, making vehicles cheaper for consumers.