PM Shehbaz approves Auto Policy 2026-31 after IMF clearance
The policy aims to transform the Pakistan auto industry and increase vehicle and auto parts exports to around $6 billion over five years.
The approval came after the IMF raised no objections to the draft shared with the lender, according to media source.
The government is also expected to introduce a money bill, commonly known as a mini-budget, in Parliament after obtaining federal cabinet approval.
A new direction for Pakistan’s auto industry
Adviser to the Prime Minister on Industries and Production Haroon Akhtar Khan said the Auto Policy 2026-31 aims to shift the country from import-dependent vehicle assembly towards export-oriented manufacturing.
The plan focuses on increasing local production, transferring modern technology, creating jobs and connecting Pakistani manufacturers with international supply chains.
Pakistan currently has around 2,200 auto parts manufacturers. To improve their production capacity, the government will launch a Rs2.1 billion Vendor Upgradation and Technology Transfer Programme through the Engineering Development Board and the Small and Medium Enterprises Development Authority (SMEDA).
The programme will support modern machinery, technical training, quality certification and preparation for international markets.
It also aims to attract investment from at least five major companies. Automakers will be required to help local suppliers improve technology and production standards.
Local production targets for vehicles
The Auto Policy 2026-31 introduces mandatory localisation targets for manufacturers. Existing companies will have to increase domestic value addition by 2% annually, reaching an overall increase of 8% over five years.
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By 2030-31, localisation levels must reach 40% for cars and SUVs, 45% for light commercial vehicles, 80% for tractors and 90% for motorcycles and rickshaws.
For new energy vehicles, the targets are 25% for cars and SUVs and 30% for motorcycles and rickshaws.
$6 billion export target and incentives
The government has set a cumulative export target of approximately $6.01 billion. This includes $3.29 billion from auto parts and $2.72 billion from vehicle manufacturers.
Eligible exporters will receive support equal to 5% of their net export value, with an additional 10% incentive for qualifying export growth.
Import concessions and expected savings
The policy offers conditional customs duty concessions, including a 5% duty on imported battery electric vehicles priced up to $15,000 during the first two years.
However, companies must establish local manufacturing or assembly facilities by September 30, 2028, to retain this benefit.
The government expects the Pakistan auto industry to generate around $17.7 billion in foreign exchange savings over five years.
It also aims to reduce oil imports by approximately 1.823 million tonnes through greater adoption of new energy vehicles.
