The federal government has initiated a comprehensive review of the draft Auto Industry Development and Export Policy 2026–31, aiming to overhaul the automotive landscape through more accessible financing and ambitious production targets. Sources close to the development indicate that the primary objective of this new framework is to rejuvenate the struggling automobile sector by restoring consumer purchasing power. After years of record-high interest rates and restrictive lending practices that stifled market demand, the proposed reforms seek to make vehicle ownership a reality for a broader segment of the population. Central to this plan is a collaboration with the State Bank of Pakistan to relax financing constraints specifically for locally manufactured vehicles.
Key financial incentives under discussion include extending the maximum auto financing tenure to seven years, providing borrowers with more manageable monthly installment plans. Additionally, the policy suggests reducing the minimum down payment requirement to 15 percent, significantly lowering the upfront capital barrier for new buyers. To ensure the benefits are targeted toward the mainstream market, a financing cap of Rs 10 million is being proposed for eligible domestic vehicles. These measures are designed to stimulate demand not only for primary manufacturers but also for the extensive network of vendor industries that rely on a healthy automotive ecosystem to sustain economic activity.
Beyond financing, the draft policy outlines a strategic shift in how the country handles vehicle imports and consumer protection. Used vehicle imports are slated for regulated liberalization, which includes mandatory certifications, rigorous inspections, and a phased reduction of the tariff premium from 40 percent to zero by the fiscal year 2030. For the end consumer, the policy introduces high levels of accountability for manufacturers. Proposed rules include fixed booking prices and heavy penalties for delivery delays exceeding 30 days, calculated at KIBOR plus 3 percent. Furthermore, advance booking payments would be capped at 20 percent, while 3S dealerships would face a 20 percent maximum markup limit on spare parts to prevent price gouging.
The vision for 2031 is remarkably ambitious, targeting an annual vehicle production exceeding 500,000 units and auto exports reaching the $1 billion mark. A significant portion of this growth is expected to come from New Energy Vehicles, with a target of 30 percent share in new vehicle sales. To support this green transition, the draft plan envisions the installation of 3,000 EV charging stations across the country, ranging from fast chargers to battery swap stations. Incentives for NEVs include free registration and token fee exemptions in the capital, alongside a mandate for oil marketing companies to equip a portion of their stations with Level 3 fast chargers.
Structural changes to the tariff regime are also a cornerstone of the 2026–31 policy. The government plans to phase out Additional Customs Duties by 2029 and significantly reduce Regulatory Duties to foster a more competitive and technologically advanced market. Duties on Completely Knocked Down kits for cars and SUVs are expected to drop from 30 percent to 20 percent over a five-year period. However, these concessions will be increasingly linked to performance and localization. By 2031, the policy sets strict domestic value addition targets, such as 80 percent for small cars and 50 percent for all NEVs, ensuring that the growth of the auto sector directly contributes to Pakistan’s industrial self-reliance and technological expertise.
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