Why Are Cars Expensive in Pakistan? The Full Breakdown You Won’t Hear from Dealerships

You walk into a showroom, look at the price tag of a locally assembled car, and wonder:
“How is this costing more than a brand-new imported sedan in other countries?”

OR

“Why Are Cars Expensive in Pakistan?”

It’s not just you. The cost of cars in Pakistan has reached levels that defy logic, especially when compared globally.

Let’s break it down. No fluff. Just the real factors driving up car prices in Pakistan, from broken policies and taxes to supply chain black holes.

1. Massive Import Duties and Taxes

What You Pay Is Not Just the Car

When you’re buying a car in Pakistan, you’re not just paying for the vehicle. You’re paying a tax stack that includes:

• Customs Duty (up to 90% on some imported vehicles)
• Federal Excise Duty (FED)
• Sales Tax (18%)
• Additional Customs Duty (ACD)
• Capital Value Tax (CVT)
• Withholding Tax (WHT)

Let that sink in. Sometimes, the total tax cost exceeds the car’s original value.

Example: A Toyota Land Cruiser priced at around $85,000 internationally can cost over PKR 80 million in Pakistan.

📚 Reference:

You can view the FBR’s tariff structure for import duties here.

2. Rupee Devaluation & Exchange Rate Instability

Imported Components = Expensive Manufacturing

Pakistan doesn’t manufacture vehicles 100% locally. In fact, most “local” cars are CKD units (Completely Knocked Down) meaning they’re assembled locally but parts are imported.

So every time the rupee drops:

• The cost of parts rises
• Assemblers adjust prices upward
• The burden is passed to the buyer

And with the rupee’s value falling frequently (PKR/USD volatility), price hikes become routine. Not annual, but monthly.

3. Limited Local Production Capacity

Why Can’t We Just Build Cheaper Cars?

Pakistan’s auto industry is relatively underdeveloped compared to regional players like India, Thailand, or even Bangladesh.

• Lack of economies of scale
• Low production volume
• High cost per unit
• Poor R&D investment

This means manufacturers can’t bring prices down because their fixed costs per car remain high.

Want to see the data? Pakistan Automotive Manufacturers Association (PAMA) regularly publishes local production numbers.

4. Monopoly & Lack of Competition

Three Companies, One Game

Until a few years ago, Pakistan’s auto market was effectively controlled by:

• Toyota Indus
• Honda Atlas
• Pak Suzuki

This lack of competition resulted in:

• Overpriced vehicles
• Outdated models still being sold at premium rates
• No pressure to innovate

Even after newer entrants like Kia, MG, Changan, and Proton stepped in, the market dominance of the “Big Three” hasn’t been meaningfully challenged — yet.

Result?

You pay more for less.

Cars sold in Pakistan often lack features (e.g., airbags, safety sensors, infotainment systems) that are standard in global markets at similar price points.

5. Policy Inconsistency & Regulatory Chaos

No Long-Term Vision, Just Short-Term Fixes

Automotive policies in Pakistan change frequently and without clear direction. One year it’s incentives for EVs, the next it’s tax breaks for hybrids, then comes a sudden hike in duties to “protect local industry.”

For example, the Auto Policy 2021–2026 aimed to increase competition and lower prices. But in reality?

• The rupee tanked
• Taxes were raised
• Imports were restricted
• Local assemblers jacked up prices anyway

👀 Want to dive deeper?

Read the full auto policy from the Ministry of Industries and Production here.

6. Used Car Imports: A Broken Alternative

Used Imports Face Their Own Set of Challenges

Once a solid alternative, used Japanese imports (JDMs) now face:

• Age restrictions
• High regulatory duties
• Documentation issues
• Port clearance delays
• Artificial valuation by Customs (under SROs)

This means even used cars are no longer affordable. You’ll find a 2014 Toyota Prius being sold for PKR 6–7 million, a price tag that would’ve fetched a new sedan just a few years ago.

7. Freight, Fuel, & Logistics Crisis

It Costs More to Move the Car Than Make It

Global shipping costs have skyrocketed post-COVID. On top of that:

• Freight surcharges
• Port congestion
• Fuel price hikes

All of it increases the landed cost of a vehicle or its parts. This directly affects prices across the board — from economy hatchbacks to SUVs.

8. Lack of Consumer Protection = Zero Accountability

No Standards, No Safety, No Recourse

Automakers in Pakistan are not held to strong safety or quality standards. There is:

• No independent crash testing facility
• No mandatory airbag requirement (until very recently)
• No real lemon laws or return policies

This allows manufacturers to get away with delivering substandard products at premium prices — without fear of backlash.

9. Leasing Isn’t Helping Either

Financing = Debt Trap

You might think leasing helps reduce the burden — but the high interest rates (KIBOR + bank margin) mean you’ll:

• Pay 2x the car’s actual value
• Be locked in a 5–7 year loan
• Risk losing the car on one missed payment

Even so, banks are still approving loans for overpriced vehicles — keeping the bubble inflated.

10. Black Market + On-Money Culture

Booking Delays Fuel Corruption

The “on money” or premium culture is alive and thriving in Pakistan.

• A new car launches
• Dealers artificially delay deliveries
• “Agents” ask for PKR 200,000 to PKR 800,000 for early delivery

This isn’t just unethical — it’s systemic. It drives car prices even higher and makes “market rates” a joke.

So… What’s the Solution?

There’s no silver bullet, but here’s what could actually change the game:

• Serious policy enforcement and anti-monopoly regulations
• Tax reform and reduction in duties for hybrid/EVs
• Encouraging real local manufacturing, not just assembly
• Building consumer protection mechanisms in the auto sector
• Digital platforms for direct-to-consumer sales to reduce dealer corruption

Final Thought: You’re Not Paying for a Car, You’re Paying for a Broken System

If you’re buying a car in Pakistan right now, know this:

You’re not just paying for metal and wheels. You’re paying for:

• Broken policies
• Weak institutions
• Arbitrary taxes
• No consumer rights

It’s not that cars have to be expensive.
They’ve just been engineered to be by a system that profits off your lack of choice.