Pakistan plans to link its automobile industry with global supply chains, increase exports and reduce tariffs under the proposed Auto Policy 2026-31.
The draft outlines incentives for local auto parts manufacturing, export targets, tax reforms and stronger vehicle safety standards to improve the industry’s competitiveness.
The government aims to increase local value addition, reduce dependence on imported components and make vehicles more affordable.
The proposed policy also seeks to improve vehicle quality and help Pakistani manufacturers compete in regional and international markets.
The draft proposes reducing the overall weighted average tariff to below 6 percent by 2030. It also calls for gradually eliminating Statutory Regulatory Orders applicable to the auto sector and removing automobile tariffs from the Fifth Schedule of the Customs Act, 1969.
Auto Policy Targets Exports and Local Manufacturing
Pakistan’s automobile sector recorded exports worth $190 million in fiscal year 2025-26, according to the draft. The government plans to expand overseas sales through export incentives and mandatory targets, shifting the industry’s focus from tariff protection toward performance-based support.
The draft states that more than 2,200 auto parts manufacturers operate in Pakistan. The automobile sector contributes approximately 4.5 percent to large-scale manufacturing and provides direct and indirect employment to around 2.5 million people.
It also generates more than Rs. 784 billion in annual taxes.
To encourage cleaner vehicles, the proposed policy includes tax incentives for new energy vehicles, including electric vehicles, through a lower general sales tax rate and possible exemptions from other duties and taxes.
It also proposes an Auto Development Levy on conventional vehicles with larger engine capacities.
The government aims to make smaller vehicles more affordable while protecting consumers through improved quality and safety requirements.
The draft identifies low domestic value addition as a major industry challenge and calls for increased local production of auto parts to reduce reliance on imported components.
Government Plans Tougher Vehicle Safety Rules
The draft proposes adopting 45 additional WP.29 vehicle regulations by 2029 and establishing a legal framework to ensure that safety standards are effectively implemented.
It also calls for an external audit of all import permits issued by the Engineering Development Board (EDB) and the full digitalization of the board’s internal administrative systems to improve transparency and regulatory efficiency.
A steering committee headed by the minister for industries and production would oversee implementation of the policy. The proposals remain subject to the government’s final decisions.
The proposed framework seeks to increase exports, improve productivity, reduce vehicle prices and strengthen Pakistan’s position in international markets by combining tariff reforms with local manufacturing and performance-based incentives.
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