Government announces tariff reductions, electric vehicle incentives, expanded financing and new safety standards, while linking export rewards to local manufacturing targets.
ISLAMABAD – WEB DESK: Pakistan’s federal government has unveiled a new automobile policy aimed at reducing vehicle prices, promoting electric vehicles (EVs), strengthening local manufacturing and increasing automobile exports.
Information Minister Attaullah Tarar and Adviser to the Prime Minister for Industries and Production Haroon Akhtar Khan announced the new policy during a press conference in Islamabad on Saturday, November 7, 2026.
According to Haroon Akhtar, the policy is built around six major pillars: affordable vehicles, export promotion, localisation, vehicle safety, electric vehicle adoption and transparency.
He said the government expects vehicle prices to decline gradually as import duties on completely built-up vehicles (CBUs), assembly plants and automobile components are reduced over the next five years.
“The prices of all vehicles, except luxury vehicles, will come down,” Akhtar said, explaining that reducing manufacturing costs was among Prime Minister Shehbaz Sharif’s key instructions.
Government Targets Lower Vehicle Prices
The new Auto Policy 2026–31 aims to make vehicles more affordable, particularly for middle-income and lower-middle-income households.
Haroon Akhtar said the government would gradually reduce tariffs to lower production costs and encourage competition in the domestic automobile market.
The policy also seeks to improve the availability of locally manufactured vehicles while encouraging manufacturers to invest in production facilities within Pakistan.
However, the government has indicated that the price reductions will take place gradually rather than immediately.
EVs to Receive Major Tax Incentives
Electric vehicles are another major focus of the new policy.
Haroon Akhtar announced three proposed sales tax rates:
- Battery electric vehicles: 1%.
- Range-extended electric vehicles (REEVs): 6%.
- Hybrid electric vehicles: 9%.
He said electric vehicles priced up to $50,000 would also receive exemptions from capital value tax (CVT), withholding tax and federal excise duty.
Vehicles exceeding this price threshold would be treated as luxury items and taxed under normal rules.
However, the proposed tax incentives remain subject to approval by the International Monetary Fund (IMF).
EV Financing Limit Increased to Rs10 Million
The government also plans to expand financing facilities for electric vehicle buyers through the State Bank of Pakistan’s financing programme.
The financing limit for electric vehicles will increase from Rs3 million to Rs10 million, while the repayment period will be extended from three years to five years.
The move is intended to make electric vehicles more accessible to consumers who cannot afford their upfront purchase prices.
Charging Infrastructure to Receive Incentives
To encourage electric vehicle adoption, the government has introduced incentives for establishing EV charging stations.
According to Haroon Akhtar, sales tax on charging station equipment has been reduced to 1%, while customs duty has been removed.
The government also plans to address the financial gap facing charging station operators, as limited consumer demand and inadequate infrastructure have discouraged private investment.
Officials believe expanding charging facilities will help accelerate Pakistan’s transition towards electric transportation.
Export Targets Linked to Local Manufacturing
The new policy also introduces mandatory export and localisation targets for automobile manufacturers.
Under the proposed incentive mechanism, exporters will receive a 5% Duty Drawback of Local Taxes and Levies (DLTL), with an additional 10% incentive as exports increase.
However, manufacturers will have to meet their export and local manufacturing targets to qualify for the incentives.
Companies failing to achieve the specified targets could face financial penalties and lose access to export-related benefits.
The government wants automobile manufacturers to establish more production facilities in Pakistan, create employment opportunities and develop the country’s capacity to export vehicles and automotive components.
New International Vehicle Safety Standards
Vehicle safety is another important component of the policy.
Haroon Akhtar said 45 additional safety standards had been incorporated in line with the United Nations’ WP.29 vehicle regulations.
The government aims to improve the safety and quality of vehicles manufactured and used in Pakistan by bringing domestic standards closer to international requirements.
Government Targets 30% Electric Vehicles by 2030
The government is also pursuing its target of converting 30% of all new vehicles sold in Pakistan to electric power by 2030.
Akhtar suggested that the country could achieve this transition earlier than initially expected.
Meanwhile, Information Minister Attaullah Tarar highlighted the economic and environmental benefits of electric mobility.
He said greater EV adoption could reduce carbon emissions, lower petroleum imports and ease pressure on Pakistan’s fuel import bill.
Tarar also criticised previous protectionist policies, arguing that decades of support and higher import duties had failed to deliver the expected improvements in innovation, quality and value addition within the local automobile industry.
He said the new policy was developed following consultations with stakeholders, technical analysis and a review of international models.
Petrol Vehicles Below 1,000cc Exempted
The government has also outlined measures to protect lower- and middle-income consumers.
According to Haroon Akhtar, additional revenue will be collected from internal combustion engine vehicles above 1,000cc, while the exemption will protect smaller petrol-powered vehicles.
The government says the revenue collected will help finance export incentives, research and development and other initiatives supporting the automobile industry.
The policy represents a major attempt to reshape Pakistan’s automotive sector through lower production costs, increased competition, electric mobility and stronger export capacity.
However, the actual impact on vehicle prices and consumer affordability will depend on the implementation of tariff reductions, manufacturers’ response and approval of proposed tax incentives.
