Prime Minister Shehbaz Sharif has approved the final draft of the Auto Policy 2026-31, which sets a $6 billion export target for the automotive sector over five years and introduces a levy on conventional vehicles to fund electric vehicles and export incentives.
The prime minister gave the approval on Saturday after the government secured the International Monetary Fund’s nod for the policy. Adviser to the Prime Minister on Industries and Production Haroon Akhtar Khan and Information Minister Attaullah Tarar announced the decision at a news conference. The Ministry of Industries and Production had submitted the draft to the IMF team on Thursday, and it was cleared on Saturday. The policy will now go to the federal cabinet for consideration and approval.
Under the policy, an Automotive Development Levy will be charged on vehicles powered by internal combustion engines, with the proceeds used to support electric vehicles and export incentives. Vehicles up to 1,000cc will be exempt from the proposed levy, and manufacturers will be barred from demanding more than 20 per cent of a vehicle’s price as advance payment. The government says the levy is revenue-neutral: the IMF has acknowledged that the export incentives and sales tax reliefs will be supported through it.
A copy of the draft seen by Arab News put the expected savings from the policy at nearly $25 billion over five years — $17.7 billion from greater local manufacturing and $6.9 billion from adopting electric vehicles. The draft also keeps the sales tax on battery electric vehicles at 1 per cent, against an IMF proposal to raise it to 18 per cent, with 6 per cent for range-extended electric vehicles and 9 per cent for plug-in hybrids.
The export target is ambitious: Pakistan currently exports only around $190 million to $200 million worth of automotive products a year, according to the Pakistan Association of Automotive Parts and Accessories Manufacturers. The association’s chairman, Abdul Rehman Aizaz, has questioned whether the target is achievable, citing high energy and financing costs, taxation, security concerns and limited trade agreements.
Sources: Dawn, ‘Auto policy sets $6bn export target over five years’, 8 November 2026 — https://www.dawn.com/news/2042966 ; Arab News, ‘Pakistan’s new auto policy eyes nearly $25 billion in savings via local manufacturing, EV adoption’, 23 October 2026 — https://www.arabnews.pk/pakistan/pakistans-new-auto-policy-eyes-nearly-25-billion-in-savings-via-local-manufacturing-ev-adoption-3005024 ; Bloom Pakistan, ‘Pakistan Plans Certificate Cancellation for Automakers Missing Targets for Two Years’, 22 October 2026 — https://bloompakistan.com/pakistan-plans-certificate-cancellation-for-automakers-missing-targets-for-two-years/
