Pakistan aims to lift its automotive exports to $6 billion over the next five years, Special Assistant to the Prime Minister on Industries Haroon Akhtar Khan said on Saturday. Speaking at a press conference in Islamabad alongside Information and Broadcasting Minister Attaullah Tarar, he said the target was set by Prime Minister Shehbaz Sharif.
The goal is tied to a new auto policy that ties export incentives to mandatory localisation targets. Khan said the government has introduced a reward-and-penalty system to push manufacturers toward higher exports and greater use of locally made components.
Export rewards, penalties and localisation rules
Khan said Pakistan recorded about $200 million in automotive exports in the previous financial year. Most of that came from auto parts makers, while vehicle manufacturers contributed very little.
Under the policy, manufacturers that meet their export targets will receive a 5% drawback of local taxes and levies (DLTL), plus an extra 10% incentive on incremental exports. Companies that fall short on export commitments will face penalties and must also meet minimum localisation targets.
Khan said firms would not qualify for export rebates unless they achieved both their export and local manufacturing goals.
Lower duties aimed at cheaper vehicles
The policy also seeks to bring vehicle prices down by cutting duties on completely knocked-down (CKD) kits, components, sub-components and raw materials. Khan argued that cheaper imported inputs would lower production costs and make vehicles more affordable for buyers.
The reductions will be rolled out gradually over five years, moving Pakistan’s automotive tariff structure closer to internationally competitive levels. The government is particularly focused on vehicles in the 850cc, 1,000cc and 1,300cc categories, as well as electric vehicles (EVs) priced below $15,000.
Khan said original equipment manufacturers (OEMs) will not be allowed to collect advance payments above 20% of a vehicle’s price. He added that localisation will become mandatory, with specific targets to be introduced later.
Electric vehicle incentives, tax tiers and safety standards
Khan said the government is offering several incentives to speed up electric vehicle adoption, with a goal of making 30% of all new cars and two-wheelers electric within five years. It is proposing three sales tax categories for EVs:
- 1% for fully electric vehicles
- 6% for range-extended electric vehicles
- 9% for plug-in hybrid electric vehicles
These proposed rates remain subject to approval from the International Monetary Fund (IMF). EVs priced below $50,000 would also be exempt from capital value tax (CVT), withholding tax and federal excise duty (FED).
Financing limits for EVs would rise from Rs3 million to Rs10 million, and the repayment period would be extended from three to five years, Khan said. To address limited charging infrastructure, the government plans viability gap financing for charging stations, cut sales tax on charging equipment to 1% and reduce customs duty to zero.
Khan said 45 additional vehicle safety standards would be introduced under the United Nations’ WP.29 framework, and third-party audits would be carried out every six months. He said the incentives are designed to remain revenue neutral under Pakistan’s IMF programme, with revenue drawn from vehicles powered by internal combustion engines. Vehicles with engines of 1,000cc or below would not face additional taxes, as the government sees them as affordable for lower- and middle-income households.
Khan also pointed to growth in EV sales since the National Electric Vehicle Policy was launched. Electric two-wheeler sales rose from 60,000 in 2024-25 to 242,000 in 2025-26, while electric four-wheeler sales increased tenfold over the same period. He added that electric two-wheeler sales in July and August were five times higher than a year earlier.
