The rules governing import of vehicles have been amended as follows:
(i) Under the gift and personal baggage schemes, vehicles up to three years old will now be importable.
(ii) Under the gift scheme brothers and sisters will also be eligible, besides the parents, husband, wife and children.
(iii) It will no longer be required that the vehicle be registered in the name of the Pakistani national prior to its import under the personal baggage or transfer of residence scheme.
(iv) Overseas Pakistanis holding Pakistan origin card will also be eligible to import vehicles under the gift, personal baggage and transfer of residence scheme. These cards are issued to Pakistanis opting for citizenship of another country or those carrying 'green cards' like in the United States.

The announcement predictably evoked an outcry from the powerful automobile and vending lobby in the country. The Pakistan Automotive Manufacturers Association (PAMA) and Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) cried foul saying the new policy would spell disaster for indigenous industry.

For new cars up to 1200 CC import duty has been brought down to 50 per cent. It is 60 percent for cars up to 1800 CC and 75 % for cars above 1800 CC. Import of cars is allowed in four categories. All Pakistanis can import new cars while only overseas Pakistanis can import used cars. Under baggage rules for overseas Pakistanis, imports of used and new cars are permitted on transfer of residence, gift to immediate relatives and for stay abroad extending beyond six months. New rules simplify procedures for these categories.

The restriction of ownership of a used car has been done away with and the overseas Pakistanis can buy a used car from the market, which is less than three years old. Under gift scheme an expatriate would now be able to send the gift to brothers and sisters as well besides parents, wife and children. Since left-hand drive system is in vogue in most parts of the world as against right hand in Pakistan, the ownership restriction has been dropped to facilitate import of right hand drive cars from whatever sources these are available.

Commerce minister Humayun Akhat Khan was confident that import of new and used cars would bridge the present gap of about 30,000 to 40,000 in supply and demand which had kept prices high, kept consumers waiting for months for delivery and led to the system of high premium for immediate delivery.

Consumers and car dealers have welcomed the new rules. "The market, dominated by locally assembled cars, is now set to become highly competitive with the advent of used cars in larger number. Consumers will have a wider choice to select the cars," says All Pakistan Motor Dealers Association chairman H M Shahzad.

The government, prior to the new measures taken in the Trade Policy 2005-06, increased the depreciation allowance on used car imports to two from one per cent in the budget 2005-06. This was designed to bridge the demand and supply gap of about 40,000 cars, which the local industry has failed to meet despite doubling production capacities.

The government has slashed import duties on used cars, with returning Pakistani expatriates benefiting from a reduction in duty of up to 48 per cent to import a two-year-old foreign-made car.

Import duties on new cars with a capacity of up to 1,300cc are 50 per cent; cars up to 1,800cc are charged 65 per cent and cars of more than 1800cc pay 75 per cent.

The reduction in duty for used cars means effectively that a two-year-old used car with a capacity of up to 1,300cc will be charged duty of just 2 per cent.

 The bulk of new cars sold in Pakistan are 1,300cc or below, the government is encouraging the import of larger luxury cars. Import duties on the largest cars, have been reduced from 100 to 75 per cent.