Would a Ban on Imported Cars Push Prices Higher?

As discussions over Pakistan’s future auto policy continue, some policymakers and industry stakeholders have raised the possibility of restricting or even banning car imports. While no such ban has been announced as of December 2025, the question remains: Would such a ban lead to higher vehicle prices? A review of recent market data, policy measures, and experience suggests the answer is likely yes.

Market Today: Imports, Duties, and Uncertainty

The automotive market in Pakistan is a complex mix of locally assembled vehicles and imported cars, with a growing share of used imported cars as well. In the second half of 2025, the government moved to regulate used-car imports through fresh duties: under S.R.O. 1898(I)/2025, a 40% regulatory duty was imposed on the commercial import of used vehicles. 

At the same time, industry associations have voiced concerns that even with such regulation, used-vehicle imports continue to exert “disruptive” pressure on domestic assemblers — prompting calls for stricter import policy. 

Thus, though there is no blanket ban today, policy remains fluid. That makes it worthwhile to ask: If a ban were enacted, what would happen to prices?

Supply Shock: What a Ban Would Do to Availability

A ban on imported cars would effectively remove a sizeable and price-sensitive portion of supply from the market. In Pakistan, imported and used vehicles, especially small cars, hybrid/eco-models, and specific used-car segments, currently serve as a major outlet for consumers who cannot afford or do not prefer brand-new locally assembled vehicles.

Without this segment:

• The overall supply of cars in several price segments would shrink sharply.
• Domestic assemblers would face less competition, giving them more leeway to set higher prices.
  

Given that many local manufacturers already rely on imported parts and kits, a ban on CBUs might be only the first step; restrictions could eventually ripple through to CKD/SKD import lines as well, further squeezing supply.

The result would likely be a price spike across both new and used domestically produced cars, driven by constrained supply and increased market power of remaining sellers.

Cost Pushes: Exchange Rate, Input Dependence, and Scarcity Effects

Pakistan’s auto industry is heavily dependent on imported components and inputs — even “locally assembled” cars often use foreign-sourced parts. Import restrictions tend to increase per-unit costs or reduce economies of scale.

Moreover, Pakistan has historically exhibited high exchange-rate pass-through: depreciation of the rupee tends to raise the domestic prices of imported inputs quickly, passing on the burden to consumers.

If import bans block access to entire classes of vehicles, firms may be under even greater pressure to pass costs through, leading to higher prices even for vehicles assembled domestically.

Furthermore, the limited supply of imported used cars would likely drive up demand (and hence prices) for existing “good-condition” used cars in the country, a classic scarcity-driven price push.

What Would Need to Change to Avoid a Price Hike?

For a ban not to lead to price inflation, the government would need to accompany it with strong, credible policies, such as:

• Large-scale investment in local manufacturing and parts supply, to reduce import dependence.
  
• Tax incentives or subsidies for locally assembled vehicles.
  
• Regulatory measures to ensure competition — e.g., easing entry for new assemblers, supporting multiple vendors.
  
• Robust safety, quality, and environmental regulation, to prevent black-market or low-quality vehicles from flooding the market.
  

Without such measures, a ban would likely come at the cost of higher consumer prices, market distortions, and long-term harm to affordability.

Conclusion

While Pakistan currently allows import of used and CBU vehicles under regulatory frameworks, the idea of a ban remains — at least hypothetically — on the table for some. Given the structure of the local auto industry, dependence on imports, and recent history of import-related disruptions, a ban on imported cars would almost certainly lead to higher prices across the sector — affecting both new and used vehicles.

For prices to remain stable, the government would need to accompany any ban with robust industrial, fiscal, and regulatory reforms to boost local production and ensure fair competition. Until then, consumers and industry watchers should view proposals for a ban with caution and anticipate higher sticker prices if such a policy is ever implemented.