New auto policy sets a target to increase vehicle exports to $6 billion over five years

Prime Minister Shehbaz Sharif has approved a new auto policy, which sets a target to increase Pakistan’s vehicle exports to $6 billion over the next five years. The policy will be presented to the Federal Cabinet for final approval.

The new policy proposes various measures to encourage small electric vehicles, foster the growth of the local industry, and boost exports. This includes a proposal to apply lower tariffs on small electric vehicles priced below $15,000.

Changes to Electric Vehicle Financing

According to sources within the Ministry of Industries and Production, there is a proposal to increase the maximum financing limit for the purchase of electric vehicles from PKR 3 million to PKR 10 million. Additionally, it has been proposed to extend the loan repayment period from three years to five years.

The policy also includes a plan to impose an "Automotive Development Levy" on vehicles with engines larger than 1,000cc.

Plan to Increase Exports of Vehicles and Auto Parts

The government has set a target for auto parts manufacturing companies to reach $1.2 billion in exports by the 2030-31 fiscal year. To achieve this, mandatory export targets will be assigned to vehicle manufacturing companies.

Under the proposal, companies that increase their exports will receive a rebate equivalent to 5% of the export value, with an additional 10% incentive available for exports that exceed the previous year's figures. Conversely, it is proposed that penalties be imposed on companies that fail to meet their assigned targets. If a company fails to meet its export targets for two consecutive years, its manufacturing certificate may be cancelled. The proposal also includes the withdrawal of incentives granted to such companies in the event of persistent failure.

Estimated Collection of Over Rs 232 Billion in Levies

Under the new auto policy, it is estimated that more than Rs 232 billion will be collected as an 'Automotive Development Levy' over the next five years. It is proposed that these funds be utilized for export promotion and industrial development programs.

Furthermore, funds will be allocated to introduce modern technology within the auto parts manufacturing industry. The policy also encompasses the establishment of the Pakistan Automotive Testing Institute, along with the provision of financial support for research, certification, and third-party audits within the auto sector.

Vehicle Safety Standards and Consumer Rights

The policy proposes the implementation of global safety regulations for both locally manufactured and imported vehicles. Additionally, plans are in place to incorporate buyer protection clauses into the agreements between automotive companies and consumers.

Proposals also include conducting third-party audits of the auto sector twice a year, as well as setting training targets to develop a skilled workforce for the industry.

The government has set a deadline of December 2026 for enacting legislation regarding the Automotive Development Levy. The measures outlined in this new policy aim to foster the growth of the local auto industry, increase the export of vehicles and auto parts, and enhance quality and transparency within the sector.