ISLAMABAD: Pakistan has unveiled an ambitious plan to transform its automotive industry, targeting $6 billion in cumulative vehicle and auto-parts exports over the next five years while introducing incentives for local manufacturing, electric vehicles (EVs) and more affordable cars.
Special Assistant to the Prime Minister on Industries Haroon Akhtar Khan announced the targets at a press conference alongside Information and Broadcasting Minister Attaullah Tarar on Saturday, outlining a new automotive policy that links government incentives to export performance and mandatory localisation requirements.
Pakistan recorded approximately $200 million in automotive exports during the previous financial year, with most shipments comprising locally manufactured auto parts rather than complete vehicles.
The new policy seeks to change this trend by encouraging manufacturers to expand exports, increase domestic production and integrate Pakistani vendors into international automotive supply chains.
اسلام آباد: وفاقی وزیر اطلاعات عطاء اللہ تارڑ اور وزیر اعظم کے مشیر ہارون اختر کی پر یس کا نفرنس https://t.co/mmrf1iOt6X
— PMLN (@pmln_org) November 7, 2026
$6 billion export target: Incentives and penalties
Haroon Akhtar said the government had introduced a reward-and-penalty mechanism to ensure manufacturers meet their export commitments and increase the use of locally produced components.
Under the proposed framework, manufacturers achieving their export targets will receive a 5% drawback of local taxes and levies (DLTL), along with an additional 10% incentive on incremental exports.
However, companies failing to meet export commitments will face penalties and must fulfil minimum localisation requirements. Manufacturers will not qualify for export rebates unless they achieve both export and local production targets.
Key features of Pakistan’s new auto policy
- $6 billion exports: Targeted cumulative automotive exports over five years.
- Export incentives: 5% drawback of local taxes and levies, with an additional 10% incentive on incremental exports.
- Mandatory localisation: Manufacturers must meet domestic production targets to qualify for incentives.
- Lower manufacturing costs: Gradual reduction in duties on imported components, raw materials and CKD kits.
- Affordable vehicles: Special focus on 850cc, 1,000cc and 1,300cc cars.
- Consumer protection: Vehicle manufacturers will not be allowed to collect advance payments exceeding 20% of a vehicle’s price.
Will cars become cheaper in Pakistan?
The policy aims to make locally assembled vehicles more affordable by gradually reducing duties on completely knocked-down (CKD) kits, components, sub-components and raw materials over five years.
Akhtar said lower duties on imported manufacturing inputs would reduce production costs and bring Pakistan’s automotive tariff structure closer to internationally competitive levels.
The government is particularly targeting smaller vehicles in the 850cc, 1,000cc and 1,300cc categories, alongside electric vehicles priced below $15,000.
Electric vehicles: Tax relief and higher financing limits
The government also plans to accelerate the transition towards electric mobility, targeting electric vehicles to account for 30% of all new car and two-wheeler sales within five years.
The proposed EV sales tax structure includes:
- 1% sales tax on fully electric vehicles.
- 6% sales tax on range-extended electric vehicles.
- 9% sales tax on plug-in hybrid electric vehicles.
However, these proposed sales tax rates are subject to approval from the International Monetary Fund (IMF).
Electric vehicles priced below $50,000 would also be exempt from capital value tax (CVT), withholding tax and federal excise duty (FED) under the proposed arrangements.
The government plans to increase EV financing limits from Rs3 million to Rs10 million and extend repayment periods from three to five years.
To encourage investment in charging infrastructure, the policy proposes viability gap financing for charging stations, a reduction in sales tax on charging equipment to 1% and zero customs duty.
Pakistan to introduce 45 additional vehicle safety standards
The new policy also focuses on improving vehicle safety and bringing Pakistan’s automotive industry closer to international standards.
Akhtar said 45 additional vehicle safety standards would be introduced under the United Nations’ WP.29 framework.
The government would also conduct third-party audits every six months to ensure transparency and monitor implementation of the policy.
Read Also: Pakistan Emerging as Automobile Export Hub
He said the framework had been designed to maintain revenue neutrality under Pakistan’s IMF programme, with revenue collected from internal combustion engine vehicles rather than electric vehicles.
Vehicles with engine capacities of 1,000cc or below would not face additional taxes under the proposed arrangements.
Revenue generated through the policy would also support export rebates, research and development, and local vendor development.
EV sales rise as government pushes electric mobility
Akhtar highlighted growing electric vehicle adoption following the launch of the National Electric Vehicle Policy.
According to figures shared by him, electric two-wheeler sales increased from 60,000 in 2024-25 to 242,000 in 2025-26, while electric four-wheeler sales increased tenfold over the same period.
He added that electric two-wheeler sales during July and August were five times higher than in the corresponding period last year.
Tarar criticises decades of protection for auto industry
Information Minister Attaullah Tarar said the new policy had been developed after extensive consultations with stakeholders, technical assessments and comparisons with international automotive models.
وفاقی وزیر اطلاعات و نشریات عطاء اللہ تارڑ نے کہا ہے کہ نئی آٹو پالیسی کے تحت الیکٹرک وہیکلز کو خصوصی مراعات دی گئی ہیں، مقامی سطح پر گاڑیوں کی تیاری اور برآمدات کو فروغ دیا جائے گا جبکہ عام آدمی کو سستی، معیاری اور ماحول دوست سواری کی فراہمی یقینی بنائی جائے گی۔
#AutoPolicy https://t.co/VA9h66ouyG— APP (@appcsocialmedia) November 7, 2026
Criticising decades of protectionist policies, he said high import duties had protected local manufacturers without delivering sufficient innovation, value addition and modern features for consumers.
He said Prime Minister Shehbaz Sharif was particularly focused on providing affordable transportation to middle- and lower-middle-income households.
Tarar highlighted the growing use of electric scooters and motorcycles, particularly among women travelling to educational institutions and workplaces.
Read Also: Pakistan’s New Automobile Policy 2026-31 to Boost Exports and Electric Vehicles
He said wider adoption of electric vehicles could reduce carbon emissions, improve environmental conditions, generate carbon credits and lower Pakistan’s dependence on imported fuel.
Reducing the country’s fuel import bill would also create fiscal space for investment in public facilities, infrastructure, healthcare and education, he added.
The minister stressed that localisation must translate into actual domestic manufacturing, employment generation and exports rather than simply assembling imported components.
He also reiterated that petrol-powered vehicles with engine capacities below 1,000cc, including 800cc cars, would not face additional taxes under the proposed policy.
