The proposed new auto policy of the government of Pakistan has entered the final stages; however, there is a possibility of a slight delay in its implementation due to further consultation with the International Monetary Fund (IMF) on important tax-related proposals. According to government sources, the new policy is now expected to be introduced in the first week of August 2026.
Sources say that the government initially wanted to implement the new auto policy from July 1, but its approval was delayed due to incomplete consultations between various ministries and relevant agencies. Issues related to the policy’s tax structure, industrial development and future investment are now being further considered.
According to officials, a proposal to reduce sales tax on small vehicles up to 800 cc from 18% to 12.5% was under consideration, but the IMF expressed its reservations on the proposal at an early stage. Now, detailed consultations are underway on this issue between the Ministry of Finance, Federal Board of Revenue (FBR), Ministry of Commerce, Ministry of Science and Technology and Ministry of Law to find a solution that is compatible with both fiscal discipline and industrial needs.
According to government sources, the new auto policy is not limited to tax reforms alone but is being developed as a comprehensive strategy for the auto industry for the next five years. The policy also includes goals such as promoting local investment, local manufacturing of auto parts, creating new job opportunities and transferring modern technology.
An important aspect of the policy is to promote environmentally friendly transport. According to sources, the government wants to encourage the production and use of hybrid and plug-in hybrid vehicles to reduce fuel dependence, reduce carbon emissions and enable a shift to modern auto technology. Along with this, various options for gradually reducing the production of conventional fuel-powered vehicles are also being considered.
Officials say that the new policy also includes a proposal to gradually adopt 62 modern safety standards approved by the United Nations. The aim of these standards is to ensure vehicle safety, quality and compliance with international market requirements, which is also expected to increase the competitiveness of the local industry.
Experts associated with the auto industry say that if the policy keeps the tax structure balanced and provides a clear and long-term framework for investors, it will not only boost local manufacturing but also provide consumers with access to better-quality and advanced technology-equipped vehicles.
The government has not yet officially announced the final approval of the new auto policy; however, relevant officials say that the policy will be presented to the cabinet after consultations with all stakeholders and the IMF are completed. After that, its various tax, industrial and regulatory measures are likely to be implemented in a phased manner.