Pakistan Auto Policy 2026-31 Gets IMF Clearance

Pakistan’s planned auto reset has moved one step forward, but it is still not law.

The International Monetary Fund has raised no objections to the draft Autos and Auto Parts Manufacturing Policy 2026-31, and Prime Minister Shehbaz Sharif has approved it at the policy stage. Even so, the plan still needs federal cabinet approval and then a money bill in Parliament before any rule can take effect. That means car buyers should not treat any possible duty relief, export rule, or EV incentive as final yet. For background, read our earlier coverage: Pakistan Auto Policy 2026-31 Delayed due to IMF rejection.

For readers, the big question is simple: will this make cars cheaper, widen choice, or improve parts supply? The short answer is that it may help in the long run, but not immediately.

What the policy is trying to do

The draft shifts Pakistan away from assembly that depends on imports and toward manufacturing that can sell abroad, use more local parts, and support electric vehicles and other new energy vehicles.

The government expects the policy period to bring about $6.01 billion in total auto exports. Of that, $3.29 billion is expected from auto parts and $2.72 billion from vehicles. It also projects around $17.7 billion in foreign exchange savings, mainly because Pakistan would import fewer built-up vehicles if local production and EV use rise.

A separate target is to avoid about 1.823 million tons of oil imports through new energy vehicles.

This is the broad policy idea behind Pakistan Auto Policy 2026-31 Sets $6bn Export Target.

Pressure on makers, not just incentives

The draft does not only offer support. It also sets hard targets.

Auto parts makers are expected to deliver $3.29 billion of export value, while vehicle makers are expected to build export business through the global supply chains of their parent companies and international principals. The policy also proposes a DLTL export support package of 5% of net FOB value, with an extra 10% for qualifying incremental exports.

Companies that miss their export commitments could face penalties of 1% to 3% of annual factory gate sales. If they fail for two straight years, their manufacturing certificate could be cancelled, unless force majeure applies.

Localization rules may change model economics

The policy also pushes local value addition harder.

Existing OEMs must keep current localization levels for each model and raise domestic value addition by 2% each year, which the draft describes as an 8% cumulative increase over the policy term.

By 2030-31, the minimum localization targets are set at:

• 40% for cars and SUVs with internal combustion engines

• 45% for light commercial vehicles

• 80% for tractors

• 90% for motorcycles and rickshaws

For new energy vehicles, the targets are lower but still firm:

• 25% for cars and SUVs

• 30% for motorcycles and rickshaws

If companies miss these targets, the draft says customs duty on the relevant non-localized CKD imports could rise by 3 percentage points.

What this means for buyers

For now, the policy does not mean a confirmed price cut for any specific model.

Any change in showroom prices will depend on how makers handle localization costs, export duties, technology transfer, and compliance rules. Exchange-rate swings, tax changes, and weak demand can also cancel out expected savings.

The draft does include some EV support. Battery electric vehicles priced up to $15,000 may get a 5% customs duty concession for the first two years. But importers would need to set up local assembly or manufacturing, provide a surety bond and bank guarantee, and start commercial production of the imported variant by September 30, 2028.

For buyers considering an EV, the key is to wait for the final legal text, not just the policy headline.

Why the cabinet and money bill still matter

Until Parliament approves the money bill and the government issues the final rules, the policy remains a proposal with IMF clearance, not a fully active law. That matters because final duties, tax treatment, and compliance conditions can still change before implementation.

A delayed approval could also leave room for inflation, currency movement, or cost pass-through by manufacturers.

The industry angle

The policy also aims to lift factory use. The draft says idle capacity in the auto sector may be as high as 41% to 80%, and it tries to pull more work into contract manufacturing. It also sets aside Rs. 2.1 billion for a Vendor Upgradation and Technology Transfer Program to help Pakistan’s roughly 2,200 auto parts makers improve skills, certification, and export readiness.

That could matter for local suppliers and for buyers who want better parts availability over time.

For now, the message is clear: IMF clearance is a milestone, not a final price cut. Buyers who need a car soon should compare current offers, while EV shoppers should wait for the final bill, rules, and assembly commitments before booking.

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