KARACHI: As Pakistan’s existing auto policy approaches its expiry in June 2026, the government is finalising the Auto Industry Policy 2026–31, aimed at creating a more open and competitive automotive market. The Engineering Development Board (EDB) is leading consultations with vehicle assemblers, parts manufacturers, and importers of used vehicles to shape the new framework.
Officials said the upcoming policy will be aligned with the National Tariff Policy (NTP), introduced under Pakistan’s $7 billion IMF Extended Fund Facility, which caps tariff rates on finished goods at 15 percent and seeks the elimination of concessionary SROs. The new policy marks a decisive shift toward market-driven reforms in a sector long dominated by tariff protection and restricted imports.
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At the same time, the government has permitted the commercial import of used vehicles, while maintaining baggage and gift schemes for overseas Pakistanis — mechanisms that local assemblers claim are being exploited by traders for commercial gains. The growing influx of undervalued used cars has heightened competition for local assemblers, pushing them to demand lower taxes and a fairer playing field.
Industry insiders report a growing rift between automakers and parts manufacturers. Most local assemblers — representing over a dozen global brands — are advocating for lower duties on CKD kits and localised parts, capped at 10 percent, and the removal of taxes on safety components. They argue that over half of a vehicle’s price comprises government duties and taxes, making affordability impossible without tariff rationalisation. In contrast, some Japanese assemblers and parts vendors are lobbying to retain high protectionist tariffs of up to 35 percent, a stance policymakers view as outdated and counterproductive.
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Government officials have made clear that long-term protection is unsustainable. They have asked established assemblers to justify decades of tariff support amid minimal exports, limited innovation, and outdated vehicle models. Despite localisation claims exceeding 60 percent for several models, Pakistan’s auto exports have remained negligible over the past five years.
New entrants, particularly from China and South Korea, have disrupted the market by launching hybrid and plug-in hybrid models with enhanced safety standards and competitive pricing. Analysts say the upcoming policy will aim to improve competitiveness, expand exports, and reduce consumer costs, steering the sector away from protectionism toward performance-based growth.