Pakistan Approves Five-Year Auto Policy, Rejects IMF Push to Raise EV Sales Tax to 18%

Pakistan has signed off on a new five-year automotive policy designed to strengthen local manufacturing, lift exports, and make the country’s auto industry more competitive. The plan sets a ambitious target of $6 billion in vehicle exports and $1.2 billion in auto parts exports by 2030-31.

The policy is seen as a positive step toward expanding Pakistan’s industrial capacity, creating jobs, attracting investment, and establishing the country as a stronger player in the global automotive market.

One of its key features is a decision to keep the sales tax on battery electric vehicles at 1% from 2026 to 2031—rejecting the IMF’s proposal to raise it to 18%. The policy also increases vehicle financing limits from Rs 3 million to Rs 10 million and extends repayment periods to five years, which could make vehicle ownership more accessible.

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In addition, lower import duties, incentives for manufacturers that meet export targets, and stricter vehicle safety standards are expected to encourage innovation, improve quality, and support the shift toward cleaner transportation. Overall, the policy reflects a serious effort to promote local production, strengthen the auto parts industry, and build a more sustainable, export-oriented automotive sector in Pakistan.