Honda Atlas Cars Pakistan is keeping the Honda City priced below Rs. 5 million to shield buyers from the higher 25% sales tax introduced for more expensive vehicles under the federal budget.

During a corporate briefing, the company said the Honda City, priced at around Rs. 4.9 million, qualifies for the lower 18% sales tax. Crossing the Rs. 5 million threshold would push the sedan into the 25% tax bracket, making it significantly more expensive for customers.

Honda Atlas said the strategy is crucial because the City is its flagship model, accounting for nearly 70% of the company’s total sales.

The automaker also revealed that it has absorbed part of the rising cost of imported components instead of fully passing the increase on to customers, resulting in pressure on gross margins. It attributed the higher costs mainly to the depreciation of the Thai baht against the US dollar.

The company further noted that the government has proposed increasing customs duty on certain hybrid vehicle components from 4% to 5%, although the measure is yet to be finalized. It added that non-localized CKD parts continue to attract a 30% customs duty, while localized parts are subject to a 46% duty. Imported completely built-up (CBU) vehicles are also subject to customs duties ranging from 30% to 50%, along with 4% Additional Customs Duty (ACD) and 8% Regulatory Duty (RD) on applicable imported components.

Despite the cost pressures, Honda Atlas expects Pakistan’s automobile market to grow by around 25% this year and aims to maintain or expand its market share. The company added that the new Auto Policy is still under discussion and will be implemented once officially notified by the government.