Pakistan’s government unveiled its 2026-2031 Auto and Auto Parts Manufacturing Policy on Wednesday, shifting the sector’s focus from import-dependent assembly to export-led manufacturing.
The framework mandates local value addition and introduces rigorous customs duty structures to incentivize domestic production, targeting $6 billion in cumulative exports over the next five years.
The policy, announced by Adviser to the Prime Minister on Industries and Production Haroon Akhtar Khan, marks a structural pivot for an industry historically reliant on Completely Knocked Down (CKD) imports. By linking import concessions directly to localization, the administration aims to integrate approximately 2,200 domestic auto parts manufacturers into global supply chains, Dawn reported.
Strategic Shifts for Automotive Stakeholders
- Localization Mandates: Failure to meet domestic value addition targets will trigger an automatic additional percentage points increase in customs duties on CKD imports.
- Export Incentives: A “drawback of local taxes and levies” scheme offers a 5% support on net Free on Board (FOB) value, with an additional incentive for qualifying incremental exports.
- BEV Concessions: A 5% concessional duty on Battery Electric Vehicles under $15,000 is strictly conditional on the establishment of local assembly facilities, backed by irrevocable bank guarantees.
Mandatory Localization and Duty Structures Drive Technological Progress
The policy forces a departure from assembly-only business models. Haroon Akhtar said that mandatory requirements are designed to ensure market expansion leads to tangible technological progress and job creation. Companies failing to comply with these value-addition requirements will face higher duty burdens, effectively raising the cost of capital for firms resisting local integration.
The government is also rationalizing customs duties over a five-year horizon. Import concessions are no longer guaranteed; they are now tethered to export performance and domestic manufacturing milestones.
Adviser to the Prime Minister on Industries and Production Haroon Akhtar Khan said the Autos and Auto Parts Manufacturing Policy 2026–2031 represented a major shift in Pakistan’s automotive sector. Read More: https://t.co/opccC9of2T
Government Allocates Rs2.1 Billion for Vendor Upgradation
To support this transition, the government has allocated Rs2.1 billion to be administered through the Engineering Development Board and the Small and Medium Enterprises Development Authority. This funding is earmarked for a “vendor upgradation and technology transfer programme.”
The initiative targets five anchor auto parts manufacturing firms to catalyze the development of regional manufacturing clusters. “The programme will facilitate technological upgradation, access to common manufacturing facilities, skills development, international quality certification and export readiness for domestic vendors,” Haroon Akhtar told Dawn.
Roadmap Sets $6 Billion Cumulative Export Target
The 2026-2031 roadmap sets a cumulative export target of $6 billion. This objective increases the sector's current output, moving beyond the domestic market to establish a sustainable, export-oriented business model. The policy’s incentive structure—specifically the incremental export bonus—is designed to accelerate this transition.
| Measure | Mechanism | Target/Impact |
|---|---|---|
| Export Support | 5% on net FOB value | $6bn cumulative target (2026-2031) |
| Incremental Exports | Incentive | Growth in volume/value |
| Non-Compliance | Additional customs duty | Penalty on CKD imports |
| BEV Concession | 5% concessional duty | Requires local assembly bond |
The ministry’s focus on the vendor industry acknowledges that the competitiveness of the final automotive product is inextricably linked to the quality of its components. By providing access to international quality certification, the government intends to lower the barriers that have historically prevented local parts makers from participating in global automotive supply chains.
#WATCH: Pakistan plans to make cars cheaper, boost localization and raise cumulative auto exports to $6 billion over the next five years, Adviser to the Prime Minister on Industries Haroon Akhtar Khan says. https://t.co/ZJF22XnHLx pic.twitter.com/rDZh59s7rr
The policy remains in its implementation phase, with the Engineering Development Board tasked with overseeing the compliance of manufacturers seeking duty concessions. As of November 12, 2026, firms seeking BEV concessions are required to submit surety bonds and irrevocable bank guarantees to ensure their commitments to domestic assembly are honored.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
