Why Pakistan’s new auto policy proposes 10% levy on cars

New auto policy proposes higher levy on big cars

The draft of Pakistan’s Auto Policy 2026–31 proposes an Automotive Development Levy on imported and locally manufactured or assembled vehicles. According to sources, the draft has been approved by Prime Minister Shehbaz Sharif.

Under the proposal, vehicles with engine capacities above 2,000cc would face a 10% levy. Cars with engines between 1,001cc and 2,000cc would be subject to a 2% levy.

Small cars and two-wheelers to remain exempt

Vehicles with engine capacities below 1,000cc would not face the proposed levy. Motorcycles, other two-wheelers, three-wheelers and agricultural tractors would also have a zero levy rate.

The proposed charges would apply to vehicles with internal combustion engines in the specified categories. Cars listed under Pakistan Customs Tariff heading 87.03 would face the relevant rate according to their engine capacity.

Auto Policy 2026–31 aims to reshape the industry

The proposed levy is part of the government’s broader Auto Policy 2026–31. The policy aims to strengthen domestic manufacturing and support the shift towards new-energy vehicles.

The proposed framework covers both imported vehicles and those assembled or manufactured locally. However, the final rules will determine how the levy is applied to different vehicle categories.

Final impact on car prices remains unclear

The effect on showroom prices will depend on the government’s final implementation rules. Details such as how the levy will be calculated and when it will take effect have yet to be confirmed in the provided information.

The proposed rates should not be treated as confirmed increases in car prices. Buyers will need to wait for the final policy details to understand the actual financial impact.

The proposed levy could increase costs for buyers of cars with larger engines if it is implemented as drafted. The exemption for smaller vehicles may help keep the additional burden away from some budget-conscious buyers.

The policy also aims to support local manufacturing and encourage new-energy vehicles. However, its actual impact will depend on the final rules, how manufacturers respond and whether the additional cost is passed on to consumers.

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