Pakistan’s auto policy for the next five years was unveiled in Islamabad on Saturday, 7 November. It asks carmakers to do something the industry has never done at scale: export. The government wants $6bn of vehicle exports over five years, proposes much lower sales tax on electric vehicles, and will cap the advance a buyer must pay at 20% of the price. Firms that miss export targets will face penalties, officials said.
The short version
- The new auto policy targets $6bn of cumulative vehicle exports over five years, against current exports of about $200m, according to the PM’s adviser on industries.
- Proposed sales tax on EVs: 1% for fully electric, 6% for range-extended and 9% for hybrids, subject to IMF approval.
- EV car loans can go up to Rs10m (from Rs3m) over five years; booking advances are capped at 20% of the price.
- A new levy will fall on petrol and diesel vehicles above 1,000cc; smaller cars are left unchanged.
What happened
Haroon Akhtar Khan, the Prime Minister’s Adviser on Industries and Production, announced the Pakistan auto policy at a news conference with Information Minister Attaullah Tarar, Dawn reported. Exporters will receive a 5% Duty Drawback on Local Taxes and Levies (DLTL), plus a further 10% incentive on incremental annual export growth. Localisation becomes mandatory, and carmakers get the drawback only if they meet both their export and local-manufacturing targets. Customs duties on completely built units, kits and components will be cut each year until they reach “competitive” levels after five years; no rates were published.
For electric vehicles, the policy proposes a 1% sales tax on fully electric cars, 6% on range-extended EVs and 9% on hybrids, and no capital value tax, withholding tax or federal excise duty on EVs priced up to $50,000. The State Bank’s car financing limit will be expanded to Rs10m for all EVs, with tenure stretched from three to five years. Sales tax on charging equipment falls to 1% and its customs duty is removed. The target is for 30% of new vehicles to be electric by 2030. Khan said the government is committed to its IMF programme and aims for the incentives to be revenue-neutral, funded partly by a levy on petrol and diesel vehicles above 1,000cc.
Exports must grow about six-fold to hit the target
Vehicle exports, US$ per year, November 2026
Why it matters
The auto sector has long been one of Pakistan’s most protected industries, selling mainly at home behind high tariffs. This policy tries to flip that model: lower protection over five years, rewards for exporting, and fines for not doing so. It follows the government’s wider push for export-led growth and tariff reform. For buyers, Khan said the prices of all vehicles except luxury models will come down, though no dates or percentages were given. Tarar said the policy also aims to cut the fuel import bill.
The knock-on effects
First order: EV pricing and car financing
If the IMF clears the tax rates, fully electric cars become cheaper relative to petrol models, and Rs10m loans bring more of them within reach of salaried buyers. Brands already assembling or importing EVs, such as those in the Geely and Bestway launch, stand to gain first.
Second order: parts makers and localisation
Mandatory localisation targets push work toward local vendors, but falling duties on imported components will also expose them to more competition. The parts makers’ association, PAAPAM, had urged a review of the draft policy in October, according to The Express Tribune.
Third order: fuel imports and the trade balance
More EVs and electric two-wheelers would, over time, reduce petrol demand. Sales of electric two-wheelers rose to 240,000 in FY2025-26 from 60,000 a year earlier, Dawn reported. Combined with the relaxed rules on used car imports, local assemblers face pressure from several sides at once.
Who could benefit
- EV buyers and assemblers: lower proposed sales tax, larger loans and cheaper charging equipment.
- Car buyers who book in advance: the 20% cap limits how much cash makers can hold before delivery.
- Exporting manufacturers: a 5% drawback plus a 10% incentive on export growth.
- Banks: a bigger EV auto-finance market.
Who may face pressure
- Assemblers with no export plans: penalties for missing targets, and shrinking tariff protection.
- Buyers of petrol and diesel cars above 1,000cc: the new development levy.
- Parts vendors: cheaper imported components as duties fall.
- Makers’ cash flow: smaller booking advances.
What to watch
- IMF clearance of the proposed EV sales tax rates; several concessions need it.
- Completion of the formal approval process, which Dawn said began on 7 November.
- Publication of the actual duty schedule and the individual export and localisation targets.
- The size of the new levy on vehicles above 1,000cc, and any price changes from carmakers.
Sources
- Dawn, Govt announces auto policy with focus on cheaper vehicles, EVs, 7 Nov 2026
- The Express Tribune, Govt unveils new auto policy aimed at promoting EVs, boosting localisation, 7 Nov 2026
- Aaj English, Pakistan unveils new auto policy, targets $6bn in exports, 7 Nov 2026
- Gulf News, Pakistan’s new auto policy: Will cars get cheaper? EV tax cuts, Rs10m loans explained, 8 Nov 2026
This is analysis, not investment advice. Figures are as of 8 November 2026.
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