Pakistan’s new Auto Policy 2026-31 has reached a major milestone after an Ishaq Dar-led steering committee finalized the proposed framework following consultations with the Ministry of Industries and Production and other relevant stakeholders.
Officials involved in the policymaking process said the steering committee has reached consensus on the new policy after reviewing concerns and recommendations related to electric vehicles, hybrid cars, taxation, localization and the future direction of Pakistan’s automobile industry.
The finalized proposal will now be sent to the Ministry of Industries and Production for further processing. After completing the required formalities, the ministry is expected to forward the policy to the federal cabinet for final approval.
The development comes after months of uncertainty surrounding Pakistan’s next automotive policy. The previous Auto Industry Development and Export Policy 2021-26 expired on June 30, 2026, leaving the industry waiting for a new framework.
The delay in finalizing the replacement policy had created uncertainty for automakers, dealers, consumers and investors. Disagreements between the government and local automobile manufacturers over several proposed measures had contributed to repeated delays.
One of the major areas of debate has been the government’s focus on electric vehicles and the pace at which Pakistan should transition toward cleaner forms of transportation.
The proposed Auto Policy 2026-31 is expected to promote electric vehicles and hybrid vehicles while encouraging local manufacturing and greater technology transfer. The government also aims to increase localization within the automobile industry and reduce the country’s dependence on imported petroleum products.
However, local automakers had previously raised concerns about the proposed EV-focused framework. Industry representatives argued that the transition toward electric mobility should be gradual and supported by a clear localization strategy.
Automobile dealers and other industry stakeholders have generally supported the move toward electric mobility but have called for a phased transition that gives local manufacturers enough time to develop production capabilities and supply chains.
They have also warned that excessive incentives for fully electric vehicles could unintentionally encourage imports of completely built units instead of promoting domestic manufacturing.
Another important issue surrounding the new policy is the treatment of hybrid vehicles.
With the previous auto policy expiring, the earlier tax concession available for hybrid vehicles was withdrawn. From July 1, 2026, the sales tax on hybrid electric vehicles and plug-in hybrid vehicles increased from 8.5 percent to 25 percent.
The significant increase in taxation contributed to higher vehicle prices and added pressure to an automobile market already facing uncertainty over the future policy framework.
The policy uncertainty has also reportedly affected vehicle deliveries, with some manufacturers delaying deliveries as they waited for greater clarity regarding taxation, incentives and regulations under the new framework.
The new policy is therefore expected to provide a clearer roadmap for the industry over the next five years.
The government wants the automobile sector to play a stronger role in economic growth by encouraging investment, increasing local production and improving Pakistan’s ability to manufacture vehicles and components domestically.
Technology transfer is another key objective. Authorities are seeking greater participation from international automobile companies while encouraging local manufacturers to develop advanced production capabilities.
The policy is also expected to address the balance between conventional vehicles, hybrids and electric vehicles as Pakistan attempts to reduce fuel imports and move toward more sustainable transportation.
The finalized proposal will now go through the Ministry of Industries and Production before being presented to the federal cabinet. Its final implementation will depend on cabinet approval and the detailed measures announced under the policy.
Taxation, EV incentives, treatment of hybrid vehicles, localization targets and the pace of Pakistan’s transition toward electric mobility are expected to remain among the most closely watched aspects of the final policy.
For consumers, automakers and investors, the approval of Auto Policy 2026-31 could provide much-needed clarity after months of uncertainty. The policy is also expected to shape vehicle prices, manufacturing decisions and investment trends across Pakistan’s automobile sector over the coming years.
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