Pakistan’s new Auto Policy promises major relief for car buyers

According to official sources, Prime Minister has approved the draft, which will now undergo legal scrutiny and IMF review in line with Pakistan’s commitments under the $7 billion

ISLAMABAD: The federal government has shared the final draft of its Auto Policy 2026–31 with the International Monetary Fund (IMF) for review before seeking formal approval from the Federal Cabinet.

According to official sources, Prime Minister has approved the draft, which will now undergo legal scrutiny and IMF review in line with Pakistan’s commitments under the $7 billion Extended Fund Facility. The proposed policy is aimed at reducing trade barriers, simplifying the tariff regime and gradually lowering duties on vehicles.

The new framework is being aligned with the National Tariff Policy and is expected to take effect in the current fiscal year following the expiry of the previous auto policy on June 30, 2026.

The proposed policy also introduces a stronger consumer protection regime designed to prevent car buyers from facing unexpected price increases and prolonged delivery delays.

Under the proposed mechanism, once a customer books a vehicle, the company would not be permitted to impose a higher price if the vehicle’s price is subsequently increased. The buyer would remain liable only for the price agreed at the time of booking.

Car manufacturers would also be required to provide customers with a confirmed delivery date when accepting a booking. The measure is intended to address prolonged waiting periods and discourage practices linked to delayed deliveries and speculative sales.

The draft proposes gradually reducing and capping customs duties on all cars at 15 percent by fiscal year 2030–31, while simplifying the tariff structure into four slabs of zero, five, 10 and 15 percent.

New Energy Vehicles are also expected to receive preferential treatment. Battery Electric Vehicles would be subject to a proposed one percent sales tax and exemptions from Federal Excise Duty, Capital Value Tax and Withholding Tax, while other categories, including range-extended and plug-in hybrid vehicles, would receive comparatively favourable treatment.

The government also plans to gradually phase out regulatory duties on used imported vehicles and reduce the auto sector’s weighted average tariff from 10.6 percent to around six percent by 2030.

The policy aims to increase annual vehicle production to more than 500,000 units, strengthen local manufacturing and component production, encourage vehicle exports and promote greater price stability for consumers.

The final approval of the policy will follow completion of the legal and IMF review processes, after which the government is expected to place it before the Federal Cabinet for formal endorsement.