The federal government of Pakistan has proposed sweeping tax and duty reductions for the automobile sector as part of an upcoming new auto policy and the federal budget 2026-27.
The proposals include the complete removal of additional customs duty and a significant reduction in regulatory duty currently applied across the automotive industry in Pakistan.
Under the National Tariff Policy, duties will be reduced in a phased and structured manner, allowing manufacturers time to adjust their production and pricing strategies accordingly.
Dedicated Aid for EVs, Hybrids
Battery electric vehicles will be joined by other new-energy vehicle types, which are now proposed for formal inclusion under the updated national automotive policy framework.
A customs duty of five percent has been recommended on hybrid vehicle components, making it easier for assemblers and manufacturers to source parts at a reduced cost.
Sales tax on hybrid vehicles is proposed to be reduced from its current level down to nine percent, a move expected to lower consumer prices for these vehicles.
New Duties on Auto Parts, Units
Auto parts would attract a five percent customs duty, while fully assembled vehicle units would be subject to a ten percent customs duty rate under these proposals.
Completely knocked-down kits, used by local assemblers to build vehicles, would face a customs duty range of between five and ten percent under the proposed tariff framework.
EVs, Local Assembly Favoured
Electric bikes, rickshaws, and cars are recommended to be exempt from certain duty conditions, giving these vehicle categories a targeted advantage under the revised policy structure.
Locally assembled electric vehicles will receive preferential protection compared to fully built imported units, a decision that has already been confirmed by the relevant government authorities.
Tariff Cuts for Petrol Cars
The national average tariff for locally manufactured vehicles is proposed to be maintained below six percent, aiming to support domestic production capacity within Pakistan’s auto industry.
Tariffs on fully built petrol-powered imported vehicles will be reduced gradually in a phased manner, as part of the government’s broader automotive sector liberalisation strategy.
The government plans to progressively transition auto sector incentives from existing special arrangements into the standard regulatory regime over a defined period of implementation.
Consensus on Auto Budget
Special Assistant Haroon Akhtar Khan chaired a consultative meeting with auto sector stakeholders to advance upcoming auto policy formulation and related budget proposals.
Representatives from PAAPAM and PAMA attended, with discussions focusing on duties for automotive parts and broader contours of Pakistan’s forthcoming auto industry policy framework.
The SAPM stressed consensus‑based finalization of budget proposals, ensuring stakeholder input is fully incorporated into policymaking for transparency and inclusive decision‑making processes.
Coordination between the Industries Secretary and the Engineering Development Board CEO was highlighted, aiming to prepare comprehensive, well‑informed proposals aligned with sectoral requirements.
Proposals include protection for locally manufactured auto parts and those with domestic production potential within five years, strengthening the industry, empowering manufacturers, and reducing import reliance.
