Pakistan's federal government is expected to unveil its new Automotive Industry Development and Export Plan 2026-31 in August, with Prime Minister Shehbaz Sharif directing officials to develop a framework aimed at attracting investment, expanding local vehicle manufacturing and creating employment opportunities, according to sources.

The new policy is expected to focus on increasing investment in the automotive sector while supporting the modernisation of Pakistan's vehicle manufacturing industry through measures designed to improve affordability, localisation and environmental sustainability.

Focus on quality, safety and global standards

According to sources, the framework will introduce international safety standards for locally manufactured vehicles in an effort to improve product quality and align Pakistan's automotive industry with global practices.

Officials are also planning measures to accelerate the adoption of electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs) and hybrid vehicles through targeted incentives aimed at encouraging investment and consumer uptake.

As part of Pakistan's broader climate and environmental strategy, the policy is expected to propose a carbon tax on petrol-powered and hybrid vehicles. Sources indicated that tax-related provisions under the new framework will be finalised following consultations with the International Monetary Fund (IMF).

Business community comments on reforms

Members of Pakistan's business community have commented on the Automotive Industry Development and Export Plan 2026-31, including the government's decision to reduce regulatory duties by 75%, citing its potential impact on manufacturing costs, vehicle affordability and the automotive sector.

Commenting on the proposed reforms, Rawalpindi Chamber of Commerce and Industry (RCCI) President Usman Shaukat said the business community had noted the government's focus on affordability, localisation and environmental sustainability.

According to Shaukat, the simplified tariff structure could help address cost pressures faced by local manufacturers while reducing vehicle costs for consumers. He also commented on the introduction of extended auto-financing measures, including loan tenures of up to seven years and a maximum down-payment requirement of 15%, stating that these initiatives could improve vehicle accessibility for middle-income households.

"The business community highly appreciates the government's focus on affordability, localisation and environmental stewardship," he said.

Industry calls for consultation and policy certainty

While commenting on the reforms, Shaukat said that the implementation of the Automotive Industry Development and Export Plan 2026-31 would require consultation with chambers of commerce and industry associations across the country during both the planning and implementation phases.

He said local manufacturers require greater clarity regarding the timeline for regulatory duty reductions and clearly defined localisation targets to encourage domestic manufacturing rather than increased reliance on imported components. According to Shaukat, policy certainty would enable manufacturers to make long-term investment decisions and support industry growth.

Support for electric vehicle transition

Commenting on the government's target of increasing the share of new-energy vehicles to 30% by 2030, Shaukat said the objective would require effective coordination among relevant government institutions.

He stated that local manufacturers are prepared to invest in electric vehicle technologies if supportive policies remain consistent and predictable.

"Local manufacturers are fully prepared to invest in green technologies, provided that the duty-free import of critical electric vehicle components is securely protected through aligned policies," he said.

According to industry representatives, the new policy framework could encourage localisation, attract domestic and foreign investment, improve affordability, support job creation and accelerate the adoption of cleaner transportation technologies within Pakistan's automotive manufacturing sector.