Prime Minister Shehbaz Sharif approved the draft Auto Policy 2026-31 on Tuesday. The five-year policy aims to raise auto sector exports to more than $6 billion. It also cuts taxes on electric cars and caps car booking advances at 20%.
Law Minister Azam Nazeer Tarar and Adviser on Industries and Production Haroon Akhtar presented the final draft to the Prime Minister. The policy still needs approval from the federal cabinet. Parliament must also approve it before it becomes law.
The policy sets yearly export targets for vehicles and auto parts combined. These targets rise from $256.6 million in 2026-27 to $2.19 billion in 2030-31. The five-year total comes to more than $6 billion.
Car makers who hit these targets get a reward. They receive compensation equal to 5% of their export value. Companies that grow exports beyond last year's level get an extra 10% bonus.
Firms that miss their targets face penalties. If a company misses its target for two years in a row, the government can cancel its manufacturing certificate.
The policy sets new sales tax rates for electric and hybrid cars. Battery electric cars will pay 1% sales tax. Range-extended electric cars will pay 6%. Plug-in hybrid cars will pay 9%.
These rates are lower than what the International Monetary Fund had recommended. The IMF had suggested an 18% sales tax rate.
Electric cars priced above $75,000 will pay a 10% federal excise duty. Cars priced under $15,000 will get lower import tariffs.
