Pakistan Auto Policy 2026-31: Where It Stands, What It Means

Pakistan's last auto policy ran out on June 30, 2026. Almost four months later, the five-year plan that replaces it is close but still not final. On October 20, 24NewsHD and ProPakistani reported that Prime Minister Shehbaz Sharif had approved the draft of the Automotive and Auto Parts Manufacturing Policy 2026-31. ProPakistani says the draft goes to the next federal cabinet meeting, and the cabinet is expected to give final approval soon.

In short, nothing in this policy is law yet. Every rate below is a proposal and could change.

We covered the earlier hold-up in Pakistan's New Auto Policy Delayed After IMF Talks Stall. This article covers what has happened since then.

How we got here

This has been a slow process. In September, Geo News reported "in-principle" approval from the PM. A day later, a senior Prime Minister's Office official told Arab News that the policy was "still under review, not yet approved". The official also said the draft had to go to the IMF before the cabinet could approve it. According to that report, the PM asked officials to double the export target.

The October reports describe a revised draft. The steps that remain are the cabinet and, according to a PakWheels report, IMF and Economic Coordination Committee clearance.

What the latest draft proposes

Lower tax on electric cars

According to 24NewsHD, the government turned down an IMF proposal to raise sales tax on EVs to 18%. Instead, the draft proposes:

• 1% sales tax on battery electric vehicles
• 6% on range-extended EVs
• 9% on plug-in hybrids
• 10% federal excise duty on EVs priced above $75,000

The proposed limit for EV financing would rise from Rs. 30 Lac to Rs. 1 Crore, and the repayment period would grow from three years to five.

The September draft that Geo reported was different. It had an 18% sales tax across all vehicle categories, with green-vehicle support paid as subsidies. This is one of the main points that changed between drafts, so wait for the final notification before you rely on any EV tax rate.

A new levy on bigger engines

The October draft adds an Automotive Development Levy. The rates PakWheels reported are the same for locally made and imported cars:

• Up to 1,000cc: 0%
• 1,001cc to 2,000cc: 2%
• Above 2,000cc: 10%

The government wants to pass a law for this levy by December 2026, and expects it to raise more than Rs. 232 billion over five years (24NewsHD). PakWheels points out that the draft doesn't say how the levy would combine with taxes that already exist. A 0% levy also doesn't make small cars tax-free.

Lower import duties, phased in slowly

The draft cuts import duties step by step, bringing vehicle tariffs down toward 15% by 2030-31. It also gives lower tariffs to EVs priced under $15,000. The September draft reported by Geo set out a four-tier customs structure of 0%, 5%, 10% and 15%. It also planned to remove regulatory and additional customs duties by FY31.

Export targets with penalties

Carmakers would have to export. The policy aims for $6 billion in vehicle and parts exports, with parts alone reaching $1.2 billion by 2030-31. Exporters would get incentives worth 5% of export value. A manufacturer that misses its target two years in a row could lose its manufacturing certificate (24NewsHD).

Safety standards

The draft also proposes a Pakistan Automotive Testing Institute and international safety standards for both local and imported vehicles.

What this means if you're buying or selling a used car

Prices won't drop overnight. The duty cuts are spread over five years, to 2030-31. Even if the cabinet approves the policy next week, showroom prices won't suddenly fall, and used-car values have no reason to crash. Be wary of anyone who tells you to wait a month because "prices are about to fall".

1,001cc to 2,000cc cars could get a little dearer new. That covers cars like the Corolla, Civic and City. If the 2% levy passes, it adds to the price of a new car. When new prices go up, used cars in the same range usually hold their value better. Owners in this range have no reason to rush a sale.

Big SUVs and 2,000cc+ cars face the largest change. A 10% levy on a car that already costs crores is a lot of money. If you're thinking about a large used SUV or a 4x4, this probably supports resale value. But nothing is confirmed until the law is passed. For more on this segment, see our luxury SUV buying guide.

Used EVs and plug-in hybrids are the hardest to predict. If a 1% tax on battery EVs survives, new EVs would get cheaper compared with petrol cars, and that could pull down used EV prices. On any used EV or PHEV, check battery health and warranty transfer before you agree on a price. Our hybrid and electric car guide covers the basics.

Watch for policy-based scams. Each time a policy is in the news, some sellers try to rush buyers, saying "the price goes up when the policy comes, pay a token today". Don't pay a token for a car you haven't inspected, whatever the headlines say. Read our safety tips before you send any money.

What to watch next

• Federal cabinet approval. Until then, everything above is a proposal.
• The final EV sales tax rate. It has already changed between drafts.
• The levy law, planned for December 2026. Check the final engine-size bands and when it takes effect.

We'll update our coverage when the policy is officially notified. Until then, buy on the car's condition and a fair market price, not on rumours about the policy.

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This article was researched and drafted with AI assistance under WheelClear's editorial policy. Every figure is taken from the sources listed below. Spotted an error? Email support@wheelclear.com and we'll correct it.