Pakistan is preparing to introduce a new five-year auto sector policy aimed at reducing tariffs and opening up the Vehicle market. The plan is being developed in consultation with the International Monetary Fund under a $7 billion Extended Fund Facility. The policy is expected to take effect from July 1, 2026.
According to officials, the government will reduce import duties to make the Vehicle market more competitive. The weighted average tariff is expected to decrease from 10.6% to 9.5% in the 2026–27 budget. Over time, the target is to bring it down further to around 7.4% by 2030. For the auto sector specifically, tariffs could fall to nearly 5.99%.
The new policy also confirms that no Regulatory Duty will be imposed on imports. This step is part of a broader strategy to simplify the tariff system. A new four-tier duty structure is expected, with rates set at 0%, 5%, 10%, and 15%. Customs duties on imported Vehicle units will be capped at 15% over the next five years.
Officials say the policy will also support local manufacturing. By encouraging competition, the government aims to reduce Vehicle prices and improve quality. Increased localisation of parts is another key goal. This could help strengthen Pakistan’s auto industry in the long term.
In addition, a 40% regulatory duty on used vehicle imports will apply in the upcoming fiscal year. However, this duty is expected to gradually decline and eventually be removed. The government has also ended the personal baggage scheme and tightened rules for gift and transfer schemes to prevent misuse.
Adviser to the Prime Minister on Industries, Haroon Akhtar Khan, said the policy is in its final stages. It will be presented to the federal cabinet soon. He added that consultations with stakeholders have been completed to ensure balanced decisions.
The upcoming reforms are also linked to new safety and environmental standards. The Motor Vehicle Development Act has been submitted to parliament and may be approved before June 2026. This law will provide a legal framework for regulating the Vehicle sector.
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Overall, the new policy is expected to bring major changes. It aims to make the Vehicle market more open, competitive, and consumer-friendly.
