Pakistan Auto Policy 2026-31: $6bn Export Goal, Cheaper EVs, 20% Cap

Pakistan has unveiled its Auto Policy 2026-31, a five-year plan that aims to make cars cheaper, push carmakers to export and speed up the switch to electric vehicles. Haroon Akhtar Khan, Adviser to the Prime Minister on Industries and Production, and Information Minister Attaullah Tarar presented the policy in Islamabad on Saturday, 7 November 2026, after Prime Minister Shehbaz Sharif approved its final draft. The policy replaces the previous auto framework, which expired on 30 June 2026.

What happened?

According to Dawn, the Ministry of Industries and Production sent the draft to the International Monetary Fund team on Thursday, 5 November, and the prime minister signed off once the IMF agreed to it. The policy now goes to the federal cabinet for formal approval. Daily Pakistan reports that the full policy document, with the detailed tax and financing arrangements, is expected to be released this week.

Officials described six pillars: more affordable vehicles, especially for middle and lower-middle income buyers; exports; localisation of parts; vehicle safety; electric vehicles; and transparency in the industry.

What are the key measures in the Auto Policy 2026-31?

Exports. The policy sets a cumulative target of $6 billion in automotive exports over five years. Manufacturers that export will receive a 5% Duty Drawback of Local Taxes and Levies (DLTL), plus an additional 10% incentive on their incremental annual export growth. The benefits only apply to companies that meet both their export and local manufacturing targets, and penalties apply to those that miss them.

Booking advances. Carmakers will not be allowed to take more than 20% of a vehicle’s price as an advance at booking. The measure is aimed at “on-money”, the premium buyers often pay to get a car delivered sooner.

Tariffs and prices. Duties on fully built imported cars, assembly kits and components will be cut every year until they reach competitive levels after five years. Khan said prices should fall gradually, except for luxury vehicles.

Automotive Development Levy. A new levy on petrol and diesel vehicles above 1,000cc will fund the EV and export incentives. Cars of 1,000cc or less are exempt. Khan said the levy is designed to be revenue-neutral and that the IMF accepted that incentives and sales tax relief would be paid for through it.

Localisation and safety. Local content targets become mandatory for each manufacturer. Dawn reports that 45 additional safety standards aligned with the UN’s WP.29 vehicle regulations framework will be introduced. Khan pointed to safety concerns over brakes, tyres and seat belts, particularly in imported used cars.

How will the policy promote electric vehicles?

The policy keeps the national goal of making 30% of new vehicles electric by 2030, a target set under the National Electric Vehicle Policy 2025-30. Proposed incentives include:

• Sales tax of 1% on battery electric vehicles, 6% on range-extended EVs and 9% on plug-in hybrids. Dawn’s initial report said these rates were subject to IMF approval.
• No capital value tax, withholding tax or federal excise duty on EVs priced up to $50,000. More expensive EVs will be taxed as luxury items.
• The State Bank of Pakistan’s car financing limit for EVs rising from Rs3 million to Rs10 million, with the repayment period extended from three to five years.
• Sales tax on charging equipment cut to 1%, customs duty on it removed, and government viability-gap funding for charging stations.

Officials said electric two-wheeler sales jumped from 60,000 units in FY2024-25 to 240,000 in FY2025-26. Tarar called EV adoption a “need of the time”.

Why does it matter?

Pakistan’s car market has long been criticised for high prices, long delivery times and heavy reliance on imported kits. Khan said current auto exports are small and mostly made up of parts, and that earlier policies failed to grow them. He rejected claims of a monopoly, noting that the country now has 16 car and SUV makers and 100 two-wheeler manufacturers.

The export push also matters for the wider economy. Pakistan’s trade gap is widening, with imports far outpacing exports in the first four months of FY2026-27, as PFM Today reported in its coverage of the October 2026 trade deficit. Cutting fuel imports is another goal: Khan said promoting EVs is a priority to reduce the country’s dependence on imported oil.

What happens next?

The draft must still be approved by the federal cabinet before its measures take effect. Manufacturers will be watching for the full document, which should set out each company’s localisation and export targets, the levy rates and the size of the penalties. Those details, not yet published, will decide how quickly buyers see lower prices on the forecourt.