The prime minister approved a draft Automotive and Auto Parts Manufacturing Policy 2026-31 on 20 October 2026. This new framework aims to generate $6.01 billion in combined vehicle and parts exports over a five-year period.
Annual export targets under the draft are set to rise from $256.6 million in 2026-27 to $2.19 billion by 2030-31. To achieve these goals, the policy proposes lowering tariffs on completely built-up vehicles and completely knocked-down kits to 15% by 2030-31.
The Pakistan Economic Survey 2024-25 showed car production reached 76,339 units between July and March of FY2025. This figure represents a 37.1% increase from the 55,678 units produced during the same period in FY2024.
Production of pickups, jeeps, SUVs, and light commercial vehicles grew by 79.8% to reach 26,147 units. The Pakistan Institute of Development Economics reports that the number of firms involved in assembling and manufacturing automobiles has now exceeded 15.
Manufacturing capacity has more than doubled over the last decade. The draft includes a 1% sales tax on battery electric vehicles and proposes raising the financing limit for these purchases from Rs3 million to Rs10 million.
Repayment terms for electric vehicles would be extended from three years to five years under the new proposal. The government plans to establish the Pakistan Automotive Testing Institute and use an Automotive Development Levy to fund industrial development and export incentives.
Collections from the Automotive Development Levy are estimated to exceed Rs232 billion over the next five years.
