ISLAMABAD – The Ministry of Industries and Production, in collaboration with the Engineering Development Board (EDB), has officially finalised the draft for the much-anticipated Auto Industry Policy 2026-31.
The framework, which was presented in a high-level briefing on Saturday, introduces a structural shift in how vehicles are priced and imported in Pakistan, aiming to balance the demands of local assemblers with the conditions set by the International Monetary Fund (IMF).
According to initial reports, the new policy introduces a four-slab customs duty system (0%, 5%, 10%, and 15%) that will replace the existing complex tax regime over the next five years.
Most notably, the government has proposed capping the duty on finished vehicles at 15%, a move analysts believe will intensify competition between locally assembled units and imported models. “The era of heavy protectionism is gradually ending. We are moving toward a market-driven economy where quality and price will define a brand’s success,” a senior official from the Ministry of Industries told reporters.
The policy also addresses the controversial issue of used car imports. Following a recent notification, the intervening period for used car imports has been extended. Still, a 40% surcharge is expected to be imposed on such imports in the upcoming fiscal year to protect the local vendor base. However, this surcharge is planned to be phased out by 2030 to align with global trade standards.
Industry experts are divided on the impact. While consumers may see a reduction in car prices due to lowered duties on CKD (Completely Knocked Down) kits, parts manufacturers (PAAPAM) have expressed concerns. “If we lower duties too quickly without building local capacity, we risk losing thousands of jobs in the vending sector,” a representative of the parts association warned.
The final draft is expected to be presented to the Prime Minister for formal approval later this month. As 2026 unfolds, the auto sector remains a vital pillar of Pakistan’s economy, and this policy will determine whether it can become a globally competitive exporter or stay focused on domestic consumption.
