Prime Minister Shehbaz Sharif has approved the Auto Policy 2026-31, under which the government has prepared a plan to increase vehicle exports, strengthen the local industry and promote the use of electric vehicles. The policy also includes proposals for a phased reduction in import duties and setting export targets for vehicle manufacturing companies.
According to the policy document, the government’s target is to increase vehicle exports to $6 billion, while it has been proposed to increase exports of local auto parts manufacturers to $1.2 billion by 2030-31. For this purpose, incentives for increased exports and a mechanism for action against companies that do not meet the targets have also been proposed.
There is a plan to reduce import duties on vehicles in phases to 15 percent by the fiscal year 2030-31. According to the government, the aim of this move is to increase competition in the market and make the local industry more effective in global markets.
Changes related to taxation and financial support have also been proposed in the electric vehicle sector. According to the document, it is proposed to keep the sales tax on battery-powered electric vehicles at one percent, range-extended electric vehicles at six percent and plug-in hybrid vehicles at nine percent. To facilitate the purchase of small electric vehicles, the financing limit has also been increased from Rs3 million to Rs10 million and the loan tenure has been increased from three to five years.
The policy also emphasizes promoting local component manufacturing, increasing manufacturers’ exports and introducing new technology. The government estimates that over Rs232 billion will be collected in five years through the Automotive Development Levy. This amount is proposed to finance export incentives, industrial development and technology improvement programs of local component manufacturers.
To protect consumers, a plan has also been put forward to include global safety standards, vehicle quality testing, third-party audits and clauses related to buyers’ rights in company contracts. The policy proposes to increase transparency in the auto sector and monitor local production targets twice a year.
The success of the new policy will depend on how much the proposed incentives increase the productivity and exports of the local industry, while maintaining a balance between import competition and consumer protection.
