PM Shehbaz approves Auto Policy 2026

Prime Minister Shehbaz Sharif has approved the Auto Policy 2026, paving the way for new measures aimed at boosting investment, exports and local manufacturing in Pakistan’s automotive sector.

According to sources, the policy will be officially announced next week after approval from the International Monetary Fund (IMF).

The development comes after a committee constituted to review the auto parts policy approved a set of recommendations for strengthening the industry and increasing its export potential.

According to the policy document, the government has proposed linking Pakistan’s auto parts industry with global value chains to increase exports. It has also recommended bringing five major anchor manufacturing companies into the country to support export-oriented production.

The proposals include establishing small and medium-sized enterprise (SME) clusters in the automotive sector. The committee has also recommended abolishing duties on the import of auto parts that are used for producing goods for export.

The document proposes establishing an Auto Parts Export Council to facilitate and promote exports. It also recommends making local value addition mandatory to encourage domestic manufacturing and reduce dependence on imported components.

Another proposal calls for allowing contract manufacturing in the automotive industry. The Engineering Development Board (EDB) approval process is also proposed to be digitised to make regulatory procedures faster and more efficient.

The policy also contains several proposals concerning electric vehicles and new energy vehicles. These include providing uniform incentives and facilities for electric vehicles to support their adoption and development in the country.

For new energy vehicles, the committee has proposed imposing only one per cent sales tax while removing the Federal Excise Duty (FED), Capital Value Tax (CVT) and withholding tax.

The recommendations also include increasing the financing limit for electric vehicles to Rs100 million to make vehicle financing more accessible.