Prime Minister Shehbaz Sharif has given his in-principle approval to Pakistan’s new Auto Policy 2026-31, clearing a major hurdle for a framework that has been stuck in negotiations for months. The development, confirmed on September 9, 2026, marks the first real breakthrough for a policy that automakers, EV importers and government officials have been arguing over since the FY27 budget discussions began.
For ordinary car buyers and the wider auto industry, this is a significant moment. The new policy is expected to reshape how vehicles are taxed, manufactured and imported in Pakistan over the next five years, with a particular emphasis on electric and hybrid vehicles.
What Happens Next
Approval from the Prime Minister is only the first step in a longer process. According to sources familiar with the matter, the policy will now be shared with the International Monetary Fund (IMF) for its review, since Pakistan’s fiscal commitments under its ongoing IMF programme require major tax and industrial policies to be vetted by the lender.
Once the IMF signs off, the policy moves to the Economic Coordination Committee (ECC) for further review, then to the federal cabinet for formal approval. From there, it will be presented in Parliament and enacted into law through a Finance Bill. Each of these stages can introduce changes, so the policy in its current form is not necessarily final.
Why the Policy Was Delayed
The Auto Policy 2026-31 has faced repeated delays since budget talks for the current fiscal year began. The core disagreement centered on how the government should treat electric vehicles (EVs) and hybrids compared to conventional petrol and diesel cars, along with disputes over localization requirements that determine how much of a vehicle must be manufactured domestically to qualify for tax incentives.
Local assemblers pushed back against provisions they felt would make it easier for imported EVs to compete with domestically produced vehicles, while EV and hybrid advocates argued that overly protective rules would slow the transition away from fossil-fuel vehicles.
Key Goals of the Policy
Based on the framework discussed so far, the policy aims to promote the adoption of electric and hybrid vehicles through tax incentives and duty structures designed to make them more price-competitive with conventional cars. It also aims to encourage local manufacturing and deeper integration of the domestic auto parts industry into vehicle production, rather than relying heavily on imported components.
Additionally, the policy seeks to increase technology transfer from international automakers to local manufacturers, which could improve the quality and sophistication of vehicles built in Pakistan, while reducing the country’s dependence on imported petroleum products — a goal that aligns with Pakistan’s broader push to manage its import bill and foreign exchange reserves.
What This Means for Consumers
It is still too early to say exactly how vehicle prices will move once the policy is implemented, since the details have not been made public and the plan must still clear the IMF, ECC, cabinet and Parliament. However, the direction is clear: buyers considering an EV or hybrid vehicle in the coming years may find better pricing and more model choices as manufacturers respond to the new incentive structure.
For the local auto parts industry — which has previously pushed for higher duties on imported vehicles to protect domestic jobs — the policy’s localization requirements will be closely watched once finalized.
Conclusion
The in-principle approval of Auto Policy 2026-31 is a milestone after a long and difficult negotiation process, but it is not the final word. The policy still needs sign-off from the IMF, the ECC, the federal cabinet and Parliament before it becomes law. STI.org.pk will continue to track the policy’s progress through each of these stages and update readers as concrete details on taxation, EV incentives and localization requirements become available. The EV push also aligns with other transport-sector initiatives, including Punjab’s expansion of its electric bus fleet to tehsil level, while prospective buyers may also want to check the government’s expanded SME, farmer and housing loan programs for financing options.