THE government’s decision to finally scrap the much-abused ‘personal baggage scheme’, long exploited by commercial traders as a backdoor for the wholesale import of used cars, is a long-overdue policy correction. The changes to the policy also tighten existing rules and introduce new restrictions on vehicle imports under the ‘transfer of residence and gift schemes’, which should minimise imports for commercial objectives while recalibrating them for their original purpose of facilitating overseas Pakistanis. The decision allowing the import of only up to three-year-old cars under these schemes will also limit inflow and prevent the country from becoming a junkyard for discarded cars.

The data shared by the All Pakistan Motor Dealers Association, the main beneficiary of the unchecked import of used cars, underscores the importance of this policy shift. The influx of 40,000 refurbished cars in FY25 and another 18,000 units in the first half of FY26 under the personal baggage route shows how these schemes increasingly distorted the domestic market and undermined the viability of local assemblers. The industry had long clamoured for such a policy reset, particularly in light of the country’s extremely low domestic sales volumes compared to those of South and Southeast Asian economies. Calls for this policy shift had gathered momentum in recent years as competition for a shrinking domestic market intensified with the entry of Korean and Chinese brands amid a massive inflow of old cars that put greater stress on local assemblers. The move is expected to provide assemblers much-needed breathing space until economic growth resumes and sales begin to recover. That said, it must be underscored that this policy reform shifts the onus squarely onto carmakers to respond to consumer needs — not only by diversifying into entry-level models but also by reducing prices. Past experience shows that manufacturers have been able to cut prices sharply when faced with competition, underscoring the extent of the margins they have been earning. These reductions can be made sustainable through deeper localisation of parts, particularly hi-tech components. The government can chip in by slashing its taxes. At the same time, assemblers should explore export opportunities to build volume and lower unit costs. Failure to respond to consumer expectations could once again prompt the government to reverse course.

Published in Dawn, January 17th, 2026