The Pakistan auto policy is set to land in August 2026, and it could change the cost of buying a car for millions of Pakistanis. The government plans to tax petrol cars more, reward electric vehicle buyers, and set new safety rules for locally made cars. Here is a plain breakdown of what is coming and what it means for your next vehicle purchase.
Why a New Pakistan Auto Policy Now?
Pakistan’s current auto framework, the Automotive Industry Development and Export Plan (AIDEP) 2021-26, is about to expire. The Engineering Development Board, which sits under the Ministry of Industries and Production, has been working on a replacement since mid-2024.
The timing is not just administrative. Pakistan spends a huge amount of foreign currency on oil imports every year, and the transport sector is one of the biggest contributors to carbon emissions. The Ministry of Climate Change has made clean transport a national priority, and the new policy is the government’s biggest push yet to act on that.
Carbon Tax on Petrol Cars: What We Know
Pakistan auto policy sources confirm a carbon tax is planned for petrol-powered and hybrid vehicles. This levy will be imposed on the first sale and import of internal combustion engine (ICE) vehicles through an act of parliament, with the revenue ring-fenced to fund the EV program. The levy is projected to raise around Rs122 billion over the policy period, which runs from 2026 to 2031.
In simple terms, if you plan to buy a new petrol car after the policy kicks in, expect to pay more upfront. Analysts also suggest keeping a close watch on final budget announcements for the exact carbon levy figures before signing any booking cheque.
For hybrid buyers, the picture is mixed. Traditional self-charging hybrids (HEVs) will face a 9% sales tax, up from the popular 8.5% rate that made cars like the Toyota Corolla Cross and Haval H6 HEV so attractive in recent years. Hybrid-specific parts will also carry a higher 10% customs duty. So if you have been eyeing a standard hybrid, the current tax window is about as good as it is going to get.
Big Incentives for Electric and Plug-In Hybrid Vehicles
The draft policy creates a sharp split between old hybrid tech and new plug-in vehicles. Plug-in hybrid electric vehicles (PHEVs) and range-extender EVs (REEVs) are proposed to drop to just 1% sales tax, down sharply from 8.5%. These vehicles will also be exempt from Federal Excise Duty, Capital Value Tax, and Withholding Tax for the full policy period.
Pure battery EVs get similar treatment: a 1% customs duty on NEV parts and 10% on complete EV imports until 2027, with sales tax exemptions for locally made components. The government’s target is bold: 30% of all new vehicle sales should be electric by 2030.
Running costs tell a compelling story. EVs cost roughly PKR 840 per 100 km in electricity, compared to around PKR 2,600 per 100 km for a petrol vehicle. An electric bike that costs Rs150,000 more than a petrol one can recover that extra cost in under two years through fuel savings alone.
For buyers interested in the broader EV and car market in Pakistan, our Honda BR-V 2026 price and specs review shows how traditional petrol SUVs compare in real ownership costs right now, before this new policy changes the equation.
New Safety Standards for Locally Made Cars
One part of the Pakistan auto policy that has received little attention so far is the push for international safety standards for vehicles built in Pakistan. The framework will require locally manufactured cars to meet global quality and safety benchmarks for the first time. This is significant because Pakistani-made cars have historically not been tested against the same crash safety or emissions standards used in Europe, Japan, or even India.
The goal is to improve build quality, protect consumers, and make Pakistani-made vehicles competitive enough to consider exporting. The policy also links safety to a broader localization push, with higher targets for the share of parts made inside Pakistan.
Consumer Protection Rules That Could End ‘On-Money’ Culture
Beyond taxes and EVs, the Pakistan auto policy draft includes rules that directly protect buyers. Final booking prices must be locked at the time of confirmation, with changes only allowed for statutory taxes. If a car is not delivered within 30 days, buyers would be entitled to compensation at KIBOR plus 3%. Dealers would also not be allowed to sell parts at a markup of more than 20% over the manufacturer’s purchase price.
If enforced properly, these rules could weaken the delayed-delivery and on-money culture that has frustrated Pakistani car buyers for years. The real test, as always, will be whether enforcement actually follows the policy announcement.
What Happens to the EV Market Before August?
Even before the new auto policy is formally unveiled, Pakistan’s EV market has grown fast. The number of electric vehicles in Pakistan rose from just 567 in 2021 to over 80,000 by June 2025, driven mainly by two- and three-wheelers. By July 2025, 65 manufacturers had secured certificates to produce electric bikes and rickshaws locally, while two companies had received approvals for electric cars and SUVs.
Global brands have noticed. BYD, MG, and Changan are all active in Pakistan, and more international manufacturers are watching to see whether the new policy creates a stable, long-term investment environment. A locally assembled PHEV from a brand like BYD or MG could soon be significantly cheaper than a conventional hybrid from established Japanese brands, despite having a larger battery.
The government plans to build 40 new EV charging stations along motorways, with roughly 105 kilometres between each station. From 2027, all federal government purchases of two- and three-wheelers must be electric, which will add significant volume to the nascent market.
Frequently Asked Questions
When will the new Pakistan auto policy be announced?
The federal government is expected to unveil the Pakistan auto policy in August 2026. Prime Minister Shehbaz Sharif has directed officials to prepare an investor-friendly framework. The policy still needs cabinet approval, so final details may change before it is officially released.
Will petrol cars become more expensive under the new policy?
Yes, the policy proposes a carbon tax on petrol and ICE vehicles imposed at the point of first sale or import. The levy is expected to be passed through an act of parliament, and the revenue will be used to fund EV subsidies and charging infrastructure. Petrol car buyers should watch for the final figures before booking.
Which vehicles get the biggest tax breaks?
Plug-in hybrid electric vehicles (PHEVs), range-extender EVs (REEVs), and pure battery EVs get the best treatment. PHEVs and REEVs are proposed for a 1% sales tax (down from 8.5%) and are exempt from Federal Excise Duty, Capital Value Tax, and Withholding Tax. Standard self-charging hybrids (HEVs) get a smaller benefit at 9% sales tax.
What does the new auto policy mean for ordinary car buyers in Pakistan?
If you are buying a petrol car, expect a slightly higher upfront cost due to the carbon levy. If you are open to a plug-in hybrid or electric vehicle, the policy is designed to make those options cheaper and more practical. Consumer protection rules on delivery timelines and dealer markups, if enforced, could also make the buying process fairer for ordinary Pakistanis.
