New Auto Policy Proposes Hybrid Duty Cuts

ISLAMABAD: A final draft of Pakistan’s new automobile policy 2026-31 has been presented to Prime Minister Shehbaz Sharif for approval, official sources said.

The government is expected to finalize the auto policy after reviewing the proposals and completing consultations with relevant stakeholders and the IMF.

According to the documents, the draft proposes a gradual reduction in duties and taxes on hybrid vehicles over the next five years, as part of the government’s efforts to promote cleaner and more fuel-efficient vehicles while encouraging investment in the domestic automobile industry.

According to the policy document, the government is considering reducing duties on hybrid vehicles with engine capacities above 1,800cc in phases over five years. The duty on hybrid vehicles above 1,801cc is proposed to be reduced from the existing 50 percent to 30 percent by the end of the five-year period.

For hybrid vehicles with engine capacities ranging from 1,501cc to 1,800cc, the draft contains proposals for a phased reduction in duties. One proposal suggests bringing the duty down to 20 percent over five years, while another provision proposes reducing the duty from 50 percent to 30 percent during the same period.

The draft also proposes reductions in duties on smaller hybrid vehicles. For vehicles with engine capacities between 851cc and 1,000cc, the duty could be gradually reduced from 50 percent to 30 percent over five years.

Similarly, the duty on hybrid vehicles with engine capacities of up to 800cc is proposed to be reduced in phases from 50 percent to 30 percent during the five-year policy period.

The proposed incentives are not limited to passenger vehicles. According to the document, the government is also considering reducing duties on hybrid trucks from 30 percent to 15 percent over the next five years.

A similar reduction has been proposed for hybrid buses, with the duty potentially being brought down from 30 percent to 15 percent during the policy period.

The draft also contains proposals concerning high-roof commercial vehicles. Duties on these vehicles could be reduced from 60 percent to 30 percent over the next five years, the document said.

The proposed measures are aimed at gradually lowering the cost of hybrid and other more fuel-efficient vehicles while encouraging the automotive industry to shift toward newer technologies.

However, the tax-related aspects of the new auto policy are still subject to discussions with international lenders. Sources said Pakistan is expected to settle tax-related matters concerning the new automobile policy with the International Monetary Fund (IMF) in October.

The final approval of the policy would follow the completion of consultations on taxation, import duties and other fiscal measures.

The new policy is expected to provide a framework for the automobile sector from 2026 to 2031 and could have a significant impact on vehicle prices, imports, local manufacturing and investment in Pakistan’s automotive industry.