Pakistan Auto Industry Raises Concerns Over New Auto Policy 2026–31

Pakistan’s automotive industry has asked the government to share the draft Auto Policy 2026–31 before it is submitted for final approval, as manufacturers seek clarity over proposed export requirements, tariff changes and possible penalties for companies that fail to meet future targets.

The Pakistan Automotive Manufacturers Association (PAMA) said it was concerned by reports that the new framework had largely been prepared and could soon be presented to Prime Minister Shehbaz Sharif.

Of particular concern to the association are reports that manufacturers could face measures including incremental tariffs or even cancellation of manufacturing licences if specified export targets are not achieved. PAMA has asked for consultation before any such provisions become final.

However, those reported penalties should not yet be treated as confirmed government policy.

As of the latest publicly available information, the Ministry of Industries and Production had said the new policy would be unveiled shortly but had not published a final Auto Policy 2026–31 document on its policy portal. The ministry’s publicly listed automotive framework remains the previous Auto Industry Development and Export Policy 2021–26.

Why Is Pakistan’s Auto Industry Worried?

PAMA says manufacturers support the government’s objective of increasing automobile and parts exports but believe export growth should be encouraged through incentives, investment and a stable business environment rather than punitive measures.

PAMA Director General Razi ur Rahman said developing an export industry requires long-term investment in areas such as technology, product development, localisation, international certification, supply chains and overseas market development.

The association argues that manufacturers cannot control every factor affecting exports.

Exchange rates, logistics costs, international demand, trade agreements, energy costs and access to overseas markets can all influence whether a vehicle or component manufactured in Pakistan is competitive internationally.

PAMA has therefore asked the government to provide manufacturers and vendors with an opportunity to review the draft and submit feedback before it receives final approval.

What Is the Government Planning?

The government has been working on a new automotive framework to replace the Auto Industry Development and Export Policy 2021–26, which reached the end of its policy period on June 30, 2026.

On September 18, the Ministry of Industries and Production said Adviser to the Prime Minister on Industries and Production Haroon Akhtar Khan expected the new auto policy to be announced shortly.

The ministry said the government wanted the policy to incentivise stakeholders, including auto-parts manufacturers, and support Pakistani suppliers in expanding exports.

The proposed Automobiles and Auto Parts Manufacturing Policy 2026–31 has also been undergoing inter-ministerial consultation.

Reports on the consultation process indicate that the framework is intended to shift Pakistan’s automotive sector toward greater domestic value addition, exports, competition and technology development while aligning tariff policy with broader industrial reforms.

Draft Reportedly Includes Higher Export Targets

Details reported from earlier versions of the proposed policy suggest that automobile exports would become much more important during the next five-year period.

An analysis of the proposed framework published by Dawn reported that manufacturers of cars, jeeps and SUVs could be required to export the equivalent of 12% of their factory-gate production value by FY2029-30.

Auto-parts manufacturers would reportedly be expected to increase exports to around $700 million by FY2030-31.

Combined vehicle and parts exports under the framework have reportedly been projected at approximately:

$1.58 billion in the final policy year
$4.59 billion cumulatively over five years

These figures relate to the reported draft and could still change before the government publishes the final policy.

Previous Auto Policy Already Had an Export Requirement

Export targets are not entirely new for Pakistan’s automotive industry.

The AIDEP 2021–26 included a target under which original equipment manufacturers were expected to consider exports of vehicles and parts equal to at least 10% of the C&F value of their total imports by June 30, 2026.

The previous policy also sought to:

Increase local manufacturing
Develop the domestic automotive supply chain
Promote affordable vehicles
Improve competition
Develop design and engineering capabilities
Increase vehicle and parts exports
Implement international vehicle-safety standards

The proposed 2026–31 framework therefore appears to continue the shift toward exports but with different targets and measurements.

A percentage of factory-gate production value is also not directly identical to the previous policy’s percentage of C&F import value, so the two export obligations should not be treated as a simple percentage-to-percentage comparison.

Domestic Value Addition Could Become More Important

The proposed policy has also been reported to place greater emphasis on minimum domestic value addition, rather than relying primarily on conventional localisation measurements.

Under one reported version of the draft, conventional passenger vehicles could be required to reach 40% minimum domestic value addition by FY2030-31.

Domestic value addition attempts to measure how much economic value is actually generated inside Pakistan.

That can include locally manufactured components, labour and other domestic inputs rather than simply counting the number of components labelled as locally sourced.

The approach could become particularly important as vehicles increasingly incorporate electronics, batteries, sensors and other technologically advanced components that Pakistan may initially need to import.

Auto Parts Makers Are Also Concerned About Localisation

Concerns about the new framework are not limited to automobile assemblers.

Parts manufacturers have previously warned that tariff concessions for imported components, particularly those used in new-energy vehicles, could make imported parts cheaper than locally manufactured alternatives.

Industry representatives told Arab News in September that conventional locally assembled vehicles can contain substantial local content, while newly introduced electric and other new-energy vehicles may initially rely much more heavily on imported components.

They argue that Pakistan’s shift toward electric mobility should also be used to develop domestic production of components rather than replacing existing locally manufactured parts with imported alternatives.

The government, meanwhile, has said competitive localisation and the transition toward electric mobility will be important parts of the industry’s future.

Tariff Reductions Could Increase Competition

Another major element surrounding the next auto policy is Pakistan’s broader tariff-reform programme.

The proposed automotive framework is being aligned with the National Tariff Policy 2025–30, which is designed to promote export-led growth and help Pakistani industries integrate more deeply into international supply chains.

Reported versions of the auto policy include gradual reductions in automotive protection and the eventual elimination of some regulatory and additional customs duties.

For consumers, lower import barriers could potentially increase competition and expand access to imported vehicles or components.

Local manufacturers, however, argue that tariff changes need to be structured carefully so that importing a completely built vehicle does not become commercially more attractive than producing one in Pakistan.

In a September letter to the prime minister, PAMA warned that measures favouring completely built unit imports could affect factory utilisation, localisation, employment and investment in domestic manufacturing. These are the association’s stated concerns rather than established outcomes of the proposed policy.

Used-Car Imports Are Another Industry Concern

PAMA has also raised concerns over liberalised imports of used vehicles.

The association argues that lower tariffs on imported used cars could create additional competitive pressure on local assembly and the domestic parts industry.

From the industry’s perspective, significant investments have already been made in assembly plants, tooling, vendor networks and human resources.

Broader competition policy, however, also involves questions of consumer prices, product choice, quality and the extent to which long-standing tariff protection should continue.

The final Auto Policy 2026–31 will need to show how the government intends to balance those competing objectives.

Pakistan Wants to Become an Automotive Exporter

The government’s longer-term objective is not simply to produce vehicles for the domestic market.

Officials have repeatedly said Pakistan needs to develop an automotive industry capable of competing internationally.

The Ministry of Industries and Production said in September that the government was particularly interested in helping Pakistani auto-parts manufacturers expand exports and develop international business opportunities.

Parts could potentially provide an important path toward automotive exports because components can be sold through global aftermarket and original-equipment supply chains without requiring Pakistan to export an entire locally assembled vehicle.

The proposed framework reportedly targets $700 million in parts exports by 2030-31.

Why Exporting Complete Cars Can Be Difficult

Pakistan’s automotive market is relatively small compared with major manufacturing bases such as China, India, Thailand and Indonesia.

A key challenge is economies of scale.

Reported industry estimates put annual Pakistani car and light-vehicle sales at roughly 200,000 units spread across numerous manufacturers and models.

Large international manufacturers typically allocate export production to plants capable of producing vehicles or components at highly competitive costs.

Pakistani subsidiaries may therefore depend on decisions made by their global parent companies regarding which factories supply particular international markets.

PAMA says the ability to meet export targets also depends on matters such as international certifications, market access, logistics and trade agreements.

Could Auto Parts Offer a Bigger Export Opportunity?

Pakistan already has a large installed base of vehicles requiring replacement components such as:

Filters
Brake components
Suspension parts
Bearings
Belts and hoses
Electrical equipment
Radiators
Lamps
Castings and forgings

A large domestic replacement market can potentially give manufacturers enough production volume to develop components that can later be exported through international aftermarket channels.

This is one reason the proposed policy’s focus on parts exports could become as important as its targets for complete vehicles.

The government has also said it wants SMEs and engineering firms within the auto-parts supply chain to adopt newer technology and pursue domestic and international business opportunities.

Has the New Auto Policy Been Finalised?

Not publicly.

This is the most important point for consumers and industry participants following the current dispute.

The government has confirmed that a new policy is under development and has said it plans to announce it, while consultation among ministries and stakeholders has continued.

However, PAMA’s October 1 statement refers specifically to reports and rumours about provisions contained in the draft, including possible punitive measures.

A final government policy document confirming those provisions has not yet been publicly released through the Ministry of Industries and Production policy page reviewed by Info-Matix.

Claims that manufacturing licences will definitely be cancelled for missing export targets should therefore not be presented as final government policy at this stage.

What Happens Next?

PAMA wants the Ministry of Industries and Production and the Engineering Development Board to share the draft with manufacturers before it is sent for final approval.

The government has already held consultations over various elements of the proposed policy, including localisation, tariffs, exports and the transition toward new-energy vehicles.

Once the final policy is formally released, several provisions will be particularly important to watch:

Final vehicle-export requirements
Auto-parts export targets
Penalties, if any, for missing targets
Minimum domestic value-addition requirements
Import duties on completely built vehicles
Tariffs on imported components
Treatment of used-car imports
Incentives for exporters
Rules covering electric and hybrid vehicles
Vehicle-safety requirements

Until that final document is published, many of the most controversial provisions remain proposals or reported elements of a draft rather than enforceable rules.

Bottom Line

Pakistan’s automotive manufacturers have asked the government for greater consultation before the Auto Policy 2026–31 is approved.

PAMA supports the objective of increasing automotive exports but is concerned by reports that companies could face higher tariffs or manufacturing-licence consequences if they fail to meet ambitious export targets.

At the same time, the proposed policy is expected to push the sector toward greater exports, domestic value addition, international competitiveness and a gradual transition toward newer automotive technologies. Reported draft targets include exports equal to 12% of factory-gate vehicle production value and auto-parts exports reaching $700 million by 2030-31.

The government has publicly said it wants to incentivise stakeholders and strengthen automotive and parts exports, but it has not yet published the final 2026–31 policy document.

The exact impact on manufacturers, imported vehicles, localisation and consumers will therefore depend on the final rules rather than the draft provisions currently being discussed.