Pakistan has secured the International Monetary Fund’s (IMF) approval for its new five-year automobile policy, paving the way for major changes in the country’s automotive industry.
Prime Minister Shehbaz Sharif has approved the Autos and Auto Parts Manufacturing Policy 2026–31 after receiving the IMF’s go-ahead. The policy aims to reduce import dependence, strengthen local manufacturing and increase vehicle exports.
Local Manufacturing Gets Priority
The new policy introduces mandatory localisation targets for automobile manufacturers. Companies must gradually increase the use of locally manufactured parts in their vehicles.
Pakistan has approximately 2,200 auto parts manufacturers. The government plans to support them through a Rs2.1 billion Vendor Upgradation and Technology Transfer Programme.
The initiative will help local manufacturers improve technology, develop skills and meet international quality standards.
$6 Billion Export Target Set
The policy sets a cumulative export target of approximately $6 billion between 2026 and 2031.
Auto parts manufacturers are expected to contribute around $3.29 billion, while vehicle manufacturers will account for approximately $2.72 billion.
Eligible exporters will receive a 5% drawback on local taxes and levies. An additional 10% incentive will apply to qualifying growth in exports.
Companies that fail to meet localisation and export requirements may face financial penalties. Repeated non-compliance could also result in cancellation of manufacturing certificates.
Electric Vehicles and Consumer Relief
The government will gradually reduce customs duties over five years. It will also introduce incentives for electric vehicle imports linked to domestic manufacturing commitments.
The policy offers a concessional 5% customs duty on imported electric vehicles priced up to $15,000 during the initial two years. Companies must establish local manufacturing facilities and meet specified production deadlines to qualify.
The government also expects the policy to generate approximately $17.7 billion in foreign exchange savings over five years.
The framework aims to transform Pakistan’s automobile industry into an export-oriented manufacturing sector. Its success will depend on how effectively manufacturers meet the new requirements.
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