IMF seeks more data on Pakistan's new auto policy draft

The IMF delegation was briefed that a 1% sales tax would be imposed on electric vehicles, while the sales tax on other hybrid vehicles would be increased to 18%.

During a briefing on vehicle exports, discussions were also held on setting a target of taking auto sector exports to more than $3 billion., the IMF has yet to agree to the draft auto policy and further discussions will be held on it.

The draft includes a provision under which the manufacturing company would be responsible if the price of a vehicle increases after booking, while manufacturers would also be required to provide customers with a delivery date at the time of booking.

The final draft was scheduled to be discussed with the IMF during the economic review talks., the proposed Auto Policy 2026-31 aims to reduce vehicle prices, increase exports and promote electric vehicles.

The Ministry of Industries and Production has prepared the final draft of the Automotive and Auto Parts Manufacturing Policy 2026-31, under which vehicle prices would be reduced, manufacturing quality improved and exports linked with global markets.

Six principles have been set for the new policy, which would have to be fully implemented., auto parts would be linked with global supply chains to increase exports and earn foreign exchange. Performance targets would be set, with clear penalties for failure to meet them and an incentive system for achieving the targets.

Promotion of electric vehicles has been made mandatory, while competition would be created to encourage innovation, technology and new features in manufacturing. Customs duties on conventional vehicles would be reduced by up to 80% over the next five years, while equal treatment has been proposed for plug-in hybrid electric vehicles (PHEVs) and range-extended electric vehicles (REEVs).

Exemption from federal excise duty, capital value tax and withholding tax has also been proposed for electric vehicles. The draft proposes a 1% customs duty on equipment for electric vehicle charging stations. It also recommends increasing the financing limit for electric vehicles to Rs10 million and extending the loan period from three to five years.

For cars, exports would be made mandatory at 4% during 2026-27 and 20% by 2030-31, while the target for auto parts manufacturers would be increased from 5% to 15%. The document states that lower taxes would reduce the prices of non-luxury vehicles.

It also proposes adopting 62 global standards in 2025 and introducing another 45 standards by 2029., the new policy is expected to save $17 billion in foreign exchange between 2026 and 2031.