Reporting snapshot · 8 November 2026. The policy was announced at a press conference on 7 November, but the tax rates and tariff schedule still need formal notification and, for the electric-vehicle sales tax, IMF approval. The government has not published the full policy text, so several definitions and the timing of price changes remain unclear.
What happened
Pakistan’s federal government announced a new automobile policy on 7 November, promising lower tariffs on kits and components, tax breaks for electric vehicles and mandatory localisation and export targets for manufacturers. Information Minister Attaullah Tarar and Haroon Akhtar Khan, the prime minister’s adviser on industries and production, presented the six-pillar policy at a press conference in Islamabad, Geo News reported and The Express Tribune reported.
The six priorities are affordable vehicles, export promotion, localisation, vehicle safety, electric mobility and transparency. Akhtar said duties on completely built units, assembly plants and components would be cut gradually over five years, with lower charges on completely knocked-down kits, parts and raw materials intended to reduce manufacturing costs. He said prices of all vehicles except luxury models would fall, according to Profit by Pakistan Today’s account of the press conference.
The electric-vehicle measures are the policy’s most specific numbers. The government proposed sales tax of 1 per cent for fully electric vehicles, 6 per cent for range-extended electric vehicles and 9 per cent for hybrid electric vehicles. It also proposed exempting electric vehicles priced up to $50,000 from capital value tax, withholding tax and federal excise duty, while treating more expensive models as luxury goods under the normal tax regime.
For buyers, the State Bank of Pakistan’s car-financing scheme would be expanded: the maximum financing limit would rise from Rs3 million to Rs10 million and the repayment period from three years to five years. Charging-station equipment would face 1 per cent sales tax, with customs duty abolished, and the government said it would help bridge the viability gap for charging operators.
The policy also introduces 45 additional vehicle safety standards aligned with the United Nations’ WP.29 framework, covering locally manufactured and imported used vehicles. On the industrial side, manufacturers would have to meet mandatory localisation targets. Companies that meet their export and domestic-manufacturing targets would receive a 5 per cent duty drawback on local taxes and levies, plus an additional 10 per cent as exports grow; those that miss the targets would face penalties and lose the rebate. The government is aiming for cumulative auto-sector exports of $6 billion over five years, up from about $200 million a year, and for 30 per cent of new vehicles to be electric by 2030.
Tarar said small petrol cars used by lower-income households would remain outside the additional tax measures. Profit reported that vehicles below 1,000cc would stay exempt, while internal-combustion vehicles above that threshold would contribute to the revenue that finances the export rebates and research spending. The government also said manufacturers would be barred from charging more than 20 per cent of a vehicle’s price as an advance payment at booking.
Why it matters
Pakistan’s car market has been shaped by high import duties and a small group of assemblers. Tarar argued that decades of protection had not delivered the innovation, quality or value that consumers expected, and that more competition was needed. The policy is an attempt to trade some of that protection for lower production costs, more local content and exports, while using the tax system to push buyers towards electric models.
The fuel-import bill is the economic argument. Petrol and diesel imports weigh on the current account, and pump prices have swung sharply in recent weeks; petrol fell for a fourth consecutive day on 6 November, taking the cumulative cut since Monday to Rs25.32 a litre. A larger electric share would not remove that bill quickly, because most vehicles on the road will remain petrol-powered for years, but the government is presenting electrification as a way to slow its growth.
The export target is ambitious. Pakistan’s auto exports are small, and the policy’s reward-and-penalty mechanism is meant to force assemblers to sell abroad rather than rely only on a protected domestic market. The risk is that lower duties on imported kits and components help importers more than local parts makers. The Pakistan Association of Automotive Parts and Accessories Manufacturers warned before the announcement that the draft could put 1.5 million jobs at risk, The Express Tribune reported. The policy’s localisation targets are the government’s answer to that concern, but their detail has not been published.
The safety standards also reopen an institutional question. Pakistan has spent months arguing over which body should set automobile standards, with the Ministry of Science and Technology asking the Economic Coordination Committee to revisit rules that it says duplicate the Pakistan Standards and Quality Control Authority’s mandate. The new WP.29 commitment will have to be fitted into that unresolved standards framework, not built alongside it.
The IMF caveat is central. The proposed EV sales-tax rates are subject to approval by the International Monetary Fund, and the government says it is aiming for revenue neutrality under its programme. Pakistan reached a staff-level agreement on the fourth review of its $7bn loan programme in October, unlocking about $1.21 billion once the IMF Executive Board approves. Any tax concession that reduces revenue without an offset would have to be negotiated with the Fund.
What is still uncertain
The first uncertainty is whether the tax rates survive. The 1 per cent, 6 per cent and 9 per cent sales-tax proposals are not notified rates; they are proposals that depend on IMF approval and on the government’s revenue arithmetic. The same applies to the tariff schedule, which is meant to be phased over five years but has not been published in full.
The second is whether consumers see the promised price cuts. Lower duties on kits and components reduce manufacturers’ costs, but assemblers are not obliged to pass the saving through immediately. The policy’s price effect will depend on competition, exchange rates and the pace of the tariff phase-in, not only on the headline duty cuts.
The third is the detail behind the localisation and export targets. The government has not published the target levels, the penalty schedule or the method for measuring local content. Without those definitions, the reward-and-penalty mechanism is difficult to assess. The same is true of the 30 per cent electric-vehicle target for 2030 and the $6 billion export target: both are ambitions, not yet a published roadmap.
There is also a small discrepancy in the published accounts. Geo News reported that petrol vehicles up to 800cc would remain outside the changes, while Profit and The Express Tribune reported a 1,000cc threshold. Tarar’s remarks at the press conference pointed to the lower-capacity segment, but the formal policy text will settle the cut-off. Reports also differed slightly on whether the 9 per cent rate applies to plug-in hybrids or to hybrid electric vehicles more broadly.
Finally, the policy does not answer the infrastructure question. Electric-vehicle adoption depends on charging stations, grid capacity and servicing, and the government’s support for charging operators is a viability-gap measure rather than a completed network. The SBP financing expansion may make electric cars easier to buy, but it does not remove the range and resale concerns that have kept many Pakistani buyers with petrol models.
What happens next
The policy now moves from announcement to notification. The government must publish the tariff schedule, secure IMF approval for the tax concessions, and issue the implementing rules for localisation, export rebates and safety standards. The State Bank will need to update its car-financing scheme, and the charging-station incentives will need customs and tax notifications before operators can use them.
The first test will be the next budget and the tariff notifications that follow it. Until then, the policy is a framework with clear political direction and several unresolved numbers. For buyers, the practical question is not what was announced on 7 November but what appears in showroom prices and bank financing terms over the next year.
