Introduction
Buying a car in Pakistan has become a distant dream for the average citizen. Whether you’re looking at a new Suzuki or a used Toyota, prices seem to be climbing like there’s no ceiling. But why? What’s behind this constant hike? While mainstream explanations often point toward "dollar rate" and "import bans," the reality is far deeper—and often untold.
"A conversation with a local mechanic in Rawalpindi revealed that rising prices weren’t just about the dollar rate — there were hidden factors at play."
In this article, we’ll uncover the hidden reasons why car prices in Pakistan continue to skyrocket, beyond the obvious, and what it means for the average Pakistani consumer.
1. The Impact of Currency Devaluation
The most frequently mentioned reason is the devaluation of the Pakistani Rupee (PKR). When the PKR weakens against the US Dollar, the cost of imported parts rises dramatically. Even locally assembled cars rely heavily on imported components like:
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Engines
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Transmission systems
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Electronic modules
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Safety components
As these parts become costlier, assemblers pass the cost onto consumers—and that’s just the beginning.
2. Overdependence on CKD Imports
Most cars in Pakistan are not fully manufactured locally. Instead, automakers import Completely Knocked Down (CKD) kits and assemble them here. This means:
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Tariffs and duties are applied on kits
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Cost of importing CKDs rises with the dollar
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No true localization = no insulation from global shocks
Despite being assembled here, these cars are still highly dependent on foreign supply chains.
3. Hefty Taxes and Duties
Pakistan’s automobile industry is one of the most taxed sectors. Here’s what a consumer pays for:
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Customs duty
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Federal excise duty (FED)
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Sales tax (currently 18%)
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Additional duties for cars over 1300cc
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Regulatory duty on imports
All this can inflate the price of a car by up to 60–80% of its actual value. In essence, you're paying more in taxes than for the car itself.
4. The Monopoly of Local Assemblers
Pakistan’s auto market lacks real competition. Only a handful of companies dominate:
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Suzuki
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Toyota (Indus Motors)
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Honda
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Kia (Lucky Motors)
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Hyundai
Due to this oligopoly:
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They can control pricing without fear
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Quality remains outdated, yet prices stay high
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Innovation and customer value are not priorities
No price regulation exists, allowing companies to increase prices arbitrarily under the guise of "global inflation."
5. Delayed Deliveries and Premium Culture ("Own Money")
Due to poor production planning and limited stock, many new car buyers face 6–12 month delivery times. As a result:
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Dealers charge “Own Money” (premium) to deliver instantly
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This black-market tactic adds Rs. 2–5 lac on average to car prices
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People who can’t wait are forced to pay extra
It’s a legally gray market that manufacturers unofficially support by keeping production short.
6. Weak Government Regulations
Unlike developed countries, Pakistan has no strong regulatory body overseeing auto pricing. Here’s what’s missing:
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No price freeze or audit system
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No checks on delivery schedules
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No support for buyers against delayed handovers
This lack of accountability emboldens automakers to push prices at will, with zero consequences.
7. Poor Local Manufacturing & Lack of R&D
Despite decades of operation, local manufacturers have made very little effort to localize production. The reasons?
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It’s cheaper to import CKDs
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No investment in local vendors
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Absence of government incentives for R&D
As a result, Pakistan has no global car export, unlike India or Vietnam. We’re stuck in a loop of import-dependence and zero innovation.
8. The Rise of Used Car Prices
When new cars become unaffordable, the demand for used cars rises. But:
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Used car supply is limited
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People hold on to old cars longer
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Prices of 5–10 year old cars sometimes match brand-new prices
This creates an inflated used car bubble, making it difficult for first-time buyers to enter the market.
9. Imports Ban & Government Policies
In recent years, Pakistan has:
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Banned imported cars over 1000cc
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Restricted financing for luxury and mid-range vehicles
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Introduced tight documentation for overseas Pakistanis
While these policies were meant to protect the local industry, they instead:
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Reduced competition
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Let local manufacturers monopolize pricing
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Hurt middle-class buyers who relied on affordable JDMs (Japanese Domestic Models)
10. Banks & Auto Financing Collapse
With high interest rates (20%+), bank financing has become nearly impossible. Most buyers:
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Avoid leasing due to huge markup
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Cannot afford down payments or monthly installments
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Resort to used cars, further increasing demand
Until the economy stabilizes, car financing will stay broken, and demand for budget cars will continue to fall.
What Can Be Done?
Fixing this crisis isn’t easy—but here are long-term solutions:
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Encourage real localization, not just assembly
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Offer tax relief for buyers and R&D for manufacturers
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Break the monopoly by inviting global players like BYD, Tesla, Geely
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Introduce an automotive pricing regulation authority
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Legalize and structure the "Own Money" market
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Develop public transport alternatives
Conclusion
The rising prices of cars in Pakistan are not a one-dimensional issue. They reflect deep-rooted economic mismanagement, weak policies, and a lack of industrial vision. Until there’s serious reform, both new and used car buyers will continue to suffer.
The average Pakistani doesn’t want luxury—they want mobility. But with cars becoming luxury items themselves, mobility is turning into a privilege only the few can afford.
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