Auto Policy 2026-31 Sets $6bn Export Target

The auto policy 2026-31 sets a $6 billion export target for Pakistan’s car and parts makers, with binding localisation levels, penalties for missed targets and a money bill to follow in Parliament.

Prime Minister Shehbaz Sharif has approved the Autos and Auto Parts Manufacturing Policy 2026-31 after the International Monetary Fund raised no objection to the draft, The Express Tribune reported on Thursday. The government will introduce a money bill in Parliament, to be termed a mini-budget, after seeking the federal cabinet’s approval.

Auto policy 2026-31 shifts focus to exports

Adviser to the Prime Minister on Industries and Production Haroon Akhtar Khan said the policy marks a clear shift away from import-dependent assembly towards export-oriented manufacturing. He said it would raise localisation, strengthen domestic parts production and bring Pakistani industry into global automotive supply chains.

The policy sets a cumulative export target of about $6.01 billion during 2026-31. Auto parts makers are expected to contribute $3.29 billion, or 55 per cent of the total, while vehicle makers are to contribute $2.72 billion, or 45 per cent.

A drawback scheme will give eligible exporters 5 per cent support on export value, with a further 10 per cent on incremental exports. Makers that miss their export targets face penalties of 1 to 3 per cent of annual factory-gate sales value. Two consecutive years of failure may lead to cancellation of the manufacturing certificate, except in cases of force majeure.

Localisation targets rise every year

The policy introduces binding localisation requirements for the first time. All makers must maintain their existing domestic value addition for each model.

Existing makers must raise domestic value addition by 2 per cent a year on the previous year’s base, a cumulative 8 per cent over the policy period. Minimum targets by 2030-31 are 40 per cent for internal combustion engine cars and SUVs, 45 per cent for light commercial vehicles, 80 per cent for tractors and 90 per cent for motorcycles and rickshaws.

New energy vehicles face rising targets too, reaching 25 per cent for cars and SUVs and 30 per cent for motorcycles and rickshaws by 2030-31. Failure will attract an additional three percentage points of customs duty on non-localised imports in the next financial year.

Rs2.1bn vendor upgrade programme

A Vendor Upgradation and Technology Transfer Programme, with an allocation of Rs2.1 billion, will run through the Engineering Development Board and SMEDA to upgrade Pakistan’s about 2,200 auto parts manufacturers.

The programme will support technological upgrading, skills development, quality certification and export readiness. Carmakers will also have to support local vendors in technology transfer, quality assurance and manufacturing capability.

Import duty cuts tied to production

Customs duty reductions will apply progressively over five years, but only alongside mandatory domestic value addition and export obligations. The concessional 5 per cent customs duty on imported battery electric vehicles valued up to $15,000 during the first two years is conditional on setting up domestic assembly, and companies must start commercial production of the imported variant by September 30, 2028.

$17.7bn in foreign exchange savings

The policy projects cumulative foreign exchange savings of about $17.7 billion during 2026-31, measured against importing equivalent vehicles in completely built-up condition. Higher adoption of new energy vehicles is projected to avoid imports of about 1.823 million tonnes of oil over the policy period. The policy also provides for periodic monitoring and a mid-term review in 2028.

Industry still waits for the document

The detail now emerging in the press stands in sharp contrast to the industry’s own position. Feature Pakistan reported this week that carmakers still do not have an official copy of the auto policy, days after the government announced it. The Pakistan Automotive Manufacturers Association has written to the Ministry of Industries and Production asking for the document.

That gap matters because the policy caps advance payments at 20 per cent of a car’s price, adds 45 new quality standards and raises the financing limit for electric vehicles from Rs2 million to Rs10 million. Parts makers have already criticised the package, arguing that it favours assemblers who import kits over local parts producers.

For buyers, the test will be simpler. The adviser has said car prices will gradually come down, yet Suzuki raised GS 150 and GD 110 prices by Rs10,000 on November 10. The electric bike market is already moving, and petrol has fallen to Rs335 a litre and diesel to Rs364.

What happens next

The draft now goes to the federal cabinet for consideration and formal approval. After that, the government will bring a money bill to Parliament to give legal effect to the levy and incentive structure. The mid-term review in 2028 will show whether the targets are being met.

Frequently asked questions

What is the export target in the auto policy 2026-31?

The policy sets a cumulative export target of about $6.01 billion during 2026-31. Auto parts makers are to contribute $3.29 billion and vehicle makers $2.72 billion.

What are the localisation targets under the policy?

By 2030-31, minimum domestic value addition must reach 40 per cent for petrol and diesel cars and SUVs, 45 per cent for light commercial vehicles, 80 per cent for tractors and 90 per cent for motorcycles and rickshaws.

What happens if a carmaker misses its export target?

Makers face penalties of 1 to 3 per cent of annual factory-gate sales value. Two consecutive years of failure may lead to cancellation of the manufacturing certificate, except in cases of force majeure.

What is the Vendor Upgradation and Technology Transfer Programme?

It is a Rs2.1 billion programme run through the Engineering Development Board and SMEDA to upgrade parts makers’ technology, skills, quality certification and export readiness, with at least five anchor firms targeted for investment.

Will the auto policy make cars cheaper?

The government says car prices will gradually come down, and the policy caps advance payments at 20 per cent of a car’s price. However, the industry still awaits an official copy of the document, and Suzuki raised some bike prices on November 10.