Questions Raised Over Secrecy of New Auto Policy 2026-31

Questions are being raised about why the Ministry of Industries and Production is reportedly keeping the details of the new Auto Policy 2026-31 confidential. This development comes after the policy draft was approved by the prime minister and submitted to the International Monetary Fund for review.

The final draft of Pakistan's new five-year Auto Policy for 2026-31 has been formally submitted to the International Monetary Fund (IMF) for review, according to available reports.

Prime Minister Shehbaz Sharif has formally approved the Auto Policy 2026-31, with an official announcement expected next week following clearance from the International Monetary Fund (IMF), according to sources.

The new policy contains significant measures to boost the export of locally manufactured auto parts. Proposals include linking with global value chains, bringing in five large anchor manufacturing firms for exports, and establishing an Auto Parts Export Council. The policy also recommends abolishing duties on the import of parts destined for use in exported products.

A major focus of the policy is the promotion of New Energy Vehicles (NEVs) and electric vehicles (EVs). Key proposals include:

• A uniform sales tax of only 1% for NEVs.
• Abolition of Federal Excise Duty (FED), Capital Value Tax (CVT), and withholding tax on NEVs.
• Increasing the vehicle loan limit for EVs to Rs10 million.

Other recommendations include allowing contract manufacturing in the auto industry and digitising the Engineering Development Board (EDB) approval process.

Pakistan's new five-year auto policy has been approved, with reports indicating that the Federal Excise Duty (FED) on cars with engines smaller than 1000cc will be abolished.

The move is part of the new Auto Policy 2026-31, which aims to bring significant changes to the country's automobile sector and provide relief to buyers of smaller vehicles.

Reports on September 9, 2026, suggest that Pakistan's new Auto Policy has taken effect, leading to a significant reduction in car prices. The development follows the government's in-principle approval of the policy, which was previously awaiting review by the International Monetary Fund and parliament.

Auto industry experts have warned that proposed reductions in duties on completely built-up (CBU) vehicles under the new auto policy could divert market demand away from locally assembled cars, harming domestic auto-parts vendors.

According to auto expert Aamir Allawala, Pakistan's auto sector is a complex ecosystem that requires protective tariff differentials to offset high domestic production costs. He noted that previous auto policies from 2016 to 2026 were heavily focused on assembly, which led to weak localisation of parts.

The Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) has formally proposed that the government maintain a minimum 50% tariff on CBU vehicle imports and a 40% tariff on locally manufactured parts to safeguard the domestic industry.

Following its in-principle approval by the prime minister, Pakistan's new Auto Policy 2026-31 will now be shared with the International Monetary Fund (IMF) for its review, according to reports on Wednesday. The policy will proceed to the Economic Coordination Committee (ECC) and the federal cabinet only after receiving the IMF's nod.

Meanwhile, analysis suggests the proposed incentives for New Energy Vehicles (NEVs) could result in an estimated annual revenue concession of around Rs150 billion. Abdul Rehman, former chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAPAAM), noted that this foregone revenue is more than four times the annual budget for the Higher Education Commission.

The draft policy also includes a proposal to introduce an environmental levy on vehicles with engine capacities above 2000cc. This measure is projected to generate nearly Rs143 billion over five years to help fund exports and research.

Prime Minister Shehbaz Sharif has granted in-principle approval to the new Auto Policy for 2026-31.