Pakistan Auto Policy 2026-31: Official Car Price Cuts, New Tax Rates and EV Financing Guide

Pakistan Auto Policy 2026-31 is set to trigger a major shake-up in the country's automobile market.

Preliminary industry estimates project vehicle price reductions of 8% to more than 22% across multiple segments.

Approved in draft form by Prime Minister Shehbaz Sharif in October 2026 (as reported by Dawn), the roadmap lowers consumer car prices.

The five-year policy also aims to accelerate electric vehicle (EV) adoption and boost auto sector exports to $6.01 billion by FY2030-31.

For Pakistani car buyers and dealers, the proposed policy introduces sweeping adjustments to General Sales Tax (GST) and import tariffs.

Bank auto financing limits are also being restructured to support vehicle buyers.

Below is a complete, fact-checked breakdown of expected price reductions, revised tax slabs, and local industry reactions.

Readers can also check our guide on DLIMS Punjab Driving License Fee for updated motoring rules.

What Is the Pakistan Auto Policy 2026-31?

The final draft of the Pakistan Auto Policy 2026-31 was presented to Prime Minister Shehbaz Sharif by Law Minister Azam Nazeer Tarar.

Adviser on Industries and Production Haroon Akhtar also participated in presenting the draft.

Following the Prime Minister's approval, the policy moves to the federal cabinet for in-principle clearance before parliamentary presentation.

The five-year roadmap centers on three structural reforms:

• Lower Import Tariffs for Open Competition: Customs tariffs on CBU vehicles and localized CKD kits will drop from 25% to 15% by FY2030-31.

• Clean Mobility Incentives: Prioritizing New Energy Vehicles (NEVs)—BEVs, PHEVs, and HEVs—through tax concessions and credit financing support.

• Export Obligations: Local assemblers must export a minimum percentage of production to ensure sustainable foreign exchange earnings.

Expected Car Price Cuts Under Pakistan Auto Policy 2026-31

Research analysis from Topline Securities and reports from Dawn and ProPakistani indicate widespread price reductions across auto segments.

Expected price cuts under the Pakistan Auto Policy 2026-31 include:

• Small Battery Electric Vehicles (BEVs under $15,000): Expected price drop of approximately 22% due to 1% GST and lower import tariffs.

• Plug-in Hybrid Electric Vehicles (PHEVs): Expected price drop of over 20% as 9% GST replaces older 8.5%–12.75% tax rates.

• Conventional Petrol Vehicles: Expected price drop of 8% to 10% following CKD tariff cuts and revised ADL slabs.

• Hybrid Electric Vehicles (HEVs): Expected price drop of around 9% from lower parts duties and market competition.

• Higher-Priced BEVs (above $15,000): Expected price drop of around 8% with 1% GST retained.

• Range-Extended Electric Vehicles (REEVs): Expected price increase of around 3% due to proposed 6% GST.

Revised Tax Rates and Duty Slabs

To make vehicles more affordable, the government has overhauled customs tariffs and sales taxes under the Pakistan Auto Policy 2026-31.

Customs duties on CKD kits will drop progressively from 25% to 15% over five years.

This measure directly lowers local production costs and encourages market competition.

Sales tax rates under the policy favor fuel-efficient and electric models:

• 1% GST: Applicable on small BEVs valued under $15,000.

• 6% to 9% GST: Applied to PHEVs and REEVs, offering substantial tax savings.

• 18% Standard GST: Maintained for conventional petrol vehicles.

Additional Customs Duty (ADL) slabs on imported auto parts are also reduced to cut manufacturing expenses.

New EV Financing Rules and Solar Integration

The Pakistan Auto Policy 2026-31 introduces consumer-friendly financing guidelines in partnership with the State Bank of Pakistan.

Key auto financing provisions include:

• Rs. 10 Million Loan Limit: State Bank financing caps for BEVs and PHEVs increase from Rs. 3 million to Rs. 10 million.

• Extended Repayment Tenure: Financing tenure for qualifying electric vehicles is extended up to 7 years.

• Solar Pairing Support: Green financing schemes allow buyers to pair EV purchases with home solar installation kits.

Infrastructure mandates also require fast-charging stations at commercial hubs and motorway fuel stations.

Local Manufacturing, Safety, and Quality Standards

Beyond price cuts, the Pakistan Auto Policy 2026-31 enforces strict localization targets, vehicle safety standards, and quality certifications.

Assemblers must achieve higher local content targets to qualify for preferential tax rates.

All new vehicles sold in Pakistan must comply with UN ECE safety regulations, including dual airbags and ABS.

The government will establish the Pakistan Automotive Testing Institute to enforce safety standards.

Why Local Auto Parts Manufacturers Are Raising Concerns

While consumers welcome lower prices, local auto parts vendors have raised serious concerns regarding tariff cuts.

PAPAAM Chairman Abdur Rehman Aizaz warned that cutting CKD tariffs to 15% threatens 1,200 local auto parts makers.

Surging CBU and used vehicle imports are adding to vendor anxieties:

• New CBU Car Imports: Rose from 391 units in August 2026 to 2,407 units in September 2026.

• Used Car Imports: Rose from 1,185 units in August 2026 to 2,454 units in September 2026.

Because local parts account for Rs. 1.5 million per assembled car, recent CBU imports represent Rs. 7.3 billion in lost local revenue.

Should You Buy a Car Now or Wait for Cabinet Approval?

Anticipated price drops under the Pakistan Auto Policy 2026-31 have led many buyers to delay purchases.

However, new tax rates and Rs. 10 million EV financing terms require formal cabinet and parliamentary approval.

Car buyers in late 2026 should monitor final government notifications before completing dealership bookings.