Pakistan proposes Auto Policy 2026-31 to lower vehicle prices and taxes

Pakistan has proposed the Auto Policy 2026-31 to restructure the domestic automotive sector. Under the draft, prices for conventional petrol cars could drop by 8% to 10%.

Hybrid electric vehicle prices might decrease by 9%, while plug-in hybrid electric vehicles could see reductions of more than 20%. Battery electric vehicles with import values under $15,000 could become 22% cheaper, whereas higher-priced models might see an 8% reduction.

Range-extended electric vehicles could become 3% more expensive under the new plan. Topline Securities noted that the draft retains a 1% general sales tax on battery electric vehicles, proposes a 9% tax for plug-in hybrids, and sets a 6% tax for range-extended models.

These figures differ from a previous draft that suggested a uniform 1% tax on all new energy vehicles. Earlier policy measures had imposed tax rates between 8.5% and 12.75% on plug-in hybrid electric vehicles.

The government intends to lower tariffs on localized completely knocked-down parts from 25% to 15% by fiscal year 2031. Abdur Rehman Aizaz stated that imports of completely built-up new cars reached 2,407 units in September.

Aizaz added that the country has 1,200 local auto parts manufacturers, with locally produced components accounting for approximately Rs1.5 million of the value of each domestically assembled vehicle. The Chairman noted that 4,861 completely built-up vehicles imported in September represented an estimated Rs7.3 billion in lost revenue for local parts manufacturers.

Aizaz described the situation as a "conspiracy to destroy several industries." Sania Irfan reported that the draft proposes a zero per cent automotive development levy on fossil fuel-driven vehicles below 1,000cc.

The proposal includes a 2% levy on 1,000-2,000cc vehicles and a 10% levy on vehicles exceeding 2,000cc. These rates replace an earlier draft where levies were between 4.5% and 5.5% across all engine categories.

Market estimates suggest the GAC Aion UT could fall to Rs5m-Rs5.2m, while the Jaecoo J7 PHEV might drop from near Rs10m to around Rs8m.