Pakistan plans to dramatically reshape its automotive sector. The government recently proposed the Auto Policy 2026-31. This new draft aims to connect local manufacturers directly with global supply chains. Furthermore, it focuses on increasing exports and reducing import tariffs. Ultimately, the policy seeks to make smaller vehicles much more affordable for the average consumer.
Auto Policy 2026-31 Shifts Focus to Exports & Local Production
The automotive industry currently provides around 2.5 million direct and indirect jobs. It also accounts for 4.5% of large-scale manufacturing. Additionally, the sector generates an impressive Rs. 784 billion in annual taxes. More than 2,200 auto parts manufacturers operate in the country right now. During the fiscal year 2025-26, the sector recorded exports worth $190 million.
Therefore, the government wants to rapidly expand these overseas sales. The new policy mandates strict export targets. As a result, the industry will shift away from heavy tariff protection. Instead, the government will provide performance-based support. Local value addition remains a primary goal. Consequently, automakers must produce more parts locally to reduce reliance on expensive imported components.
Massive Tariff Cuts & Tax Reforms
The draft policy introduces sweeping tax reforms. Firstly, officials plan to slash the overall weighted average tariff below 6% by 2030. Secondly, they will gradually eliminate the Statutory Regulatory Orders applicable to the auto sector. Moreover, automobile tariffs will completely exit the Fifth Schedule of the Customs Act, 1969.
To encourage greener choices, the policy offers substantial incentives for new energy vehicles. Electric vehicles will enjoy lower general sales tax rates. They might also receive total exemptions from other duties. Conversely, the government will heavily penalize gas guzzlers. Authorities will impose a strict Auto Development Levy on conventional vehicles equipped with larger engine capacities.
Tougher Safety Rules & Accountability
Consumer protection drives a massive part of this overhaul. The draft requires automakers to adopt 45 additional WP.29 global vehicle safety regulations by 2029. The government will also establish a strong legal framework to enforce these standards. Consequently, locally produced vehicles will meet international benchmarks and compete better regionally.
Transparency is also getting a much-needed upgrade. The government mandates an external audit of all import permits issued by the Engineering Development Board (EDB). Furthermore, the EDB must fully digitalize its internal administrative systems to cut red tape. Finally, a steering committee headed by the Minister for Industries and Production will oversee the entire implementation. These proposals currently await final government decisions.