Pakistan is preparing a major transformation for its domestic car industry through the newly drafted Auto Policy 2026-31. The government designed this framework to link local producers with worldwide supply chains, boost shipments abroad, lower import duties, and reduce prices on smaller cars for everyday buyers.

Auto Policy 2026-31 Shifts Focus to Exports & Local Production

The car sector currently supports approximately 2.5 million direct and indirect jobs while making up 4.5% of large-scale manufacturing. It also produces Rs. 784 billion in yearly taxes. More than 2,200 parts makers currently function in the country, and the industry logged $190 million in shipments during the fiscal year 2025-26.

To grow these overseas sales quickly, the strategy sets mandatory export goals and moves away from heavy tariff protection toward performance-based backing. Local value addition stays a main objective, meaning producers must build more components domestically to lower dependence on costly foreign parts.

Massive Tariff Cuts & Tax Reforms

The policy proposal brings major tax overhauls by dropping the weighted average tariff under 6% by 2030, phasing out Statutory Regulatory Orders for the sector, and removing automobile duties from the Fifth Schedule of the Customs Act, 1969.

For cleaner transport, the framework grants major perks to new energy vehicles, including lower general sales tax rates and possible exemptions from other duties. Meanwhile, conventional cars with bigger engines will face stricter penalties through an Auto Development Levy.

Tougher Safety Rules & Accountability

Consumer protection shapes a large portion of the reform. The draft demands that manufacturers implement 45 extra WP.29 global vehicle safety rules by 2029, backed by a firm legal framework to enforce these benchmarks locally.

For transparency, officials will require an outside audit of import permits granted by the Engineering Development Board, which must also digitalize its internal administration to reduce delays. A steering committee led by the Minister for Industries and Production will supervise the rollout, while the proposals await official government approval.