Prime Minister Shehbaz Sharif Approves Pakistan’s Auto Policy 2026

Islamabad, The Gulf Observer: Prime Minister Muhammad Shehbaz Sharif has approved the Auto Policy 2026, with the new policy expected to be formally announced next week following approval by the International Monetary Fund (IMF), according to sources.

The committee constituted to formulate recommendations for the auto parts policy has already approved its proposals. According to the policy document, the government plans to strengthen Pakistan’s integration into global value chains and promote exports by attracting five major anchor manufacturing companies to the country.

The document also recommends the establishment of clusters for small and medium-sized enterprises (SMEs) in the automotive sector and the elimination of duties on relevant equipment imported for the production of export-oriented auto parts.

Other proposals include the establishment of an Auto Parts Export Council, mandatory local value addition and permission for contract manufacturing in the automotive industry. The policy also recommends digitizing approval procedures involving the Engineering Development Board (EDB) to improve efficiency and facilitate investment.

Several incentives have also been proposed for the new energy vehicle (NEV) and electric vehicle (EV) sectors. These include uniform incentives, a reduced sales tax of one percent on new energy vehicles, and the removal of Federal Excise Duty (FED), Capital Value Tax (CVT) and withholding tax.

In addition, the policy proposes increasing the financing limit for the purchase of electric vehicles to Rs10 million.

The Auto Policy 2026 is aimed at modernizing Pakistan’s automobile industry in line with evolving global requirements, promoting local production and value addition, increasing automotive exports and creating a more conducive environment for investment in new energy and electric vehicles.