Pakistan's new automotive policy is nearing completion, with proposed changes covering vehicle imports, localisation, tariffs, electric vehicles and safety standards.

The Prime Minister's Adviser on Industries and Production, Haroon Akhtar Khan, briefed the Senate Standing Committee on Industries and Production on October 7th. He said the government aims to reduce vehicle costs while maintaining domestic manufacturing, noting that excessive tariff reductions could affect local production and increase imports of completely built-up (CBU) vehicles. The policy seeks to restrict CBU imports, increase localisation and promote electric vehicles.

Haroon Akhtar said a committee headed by the Law Minister had completed work on the policy. The draft will be shared with the International Monetary Fund (IMF), after which the Law Minister will brief Prime Minister Shehbaz Sharif. It is expected to be submitted to the federal cabinet for approval before being shared with the relevant parliamentary standing committees.

The government has proposed duty drawback incentives for exports of locally manufactured vehicles. However, auto-parts industry representatives said high taxes remain an obstacle to increasing vehicle exports.

Used car imports

The Senate committee discussed used vehicle imports and changes to the personal baggage and gift schemes. Haroon Akhtar said the personal baggage scheme had been abolished because of misuse, while the gift scheme would continue.

Under the proposed arrangement, vehicles imported through the gift scheme must remain registered in the recipient's name for one year and cannot be transferred during that period. Officials said a vehicle could be gifted only once every three years, with no additional tax imposed on vehicles imported under the scheme.

Representatives of the Pakistan Association of Automotive Manufacturers (PAMA) said large-scale imports of older used vehicles could affect local manufacturers and the domestic automotive industry. Haroon Akhtar clarified that commercial vehicle imports had not been banned.

Vehicle safety rules

The government is preparing new vehicle safety and environmental requirements. Haroon Akhtar said imported vehicles would require quality, environmental and fitness certificates issued by the Pakistan Standards and Quality Control Authority (PSQCA). He added that 62 clauses had been added to the relevant legislation and that environmental and quality standards would be maintained. The government is also developing safety standards for imported vehicles through the PSQCA.

Senator Saleem Mandviwalla raised concerns that changes to vehicle import regulations could affect employment in the domestic automotive industry, citing approximately 2.2 million jobs associated with the sector. The committee reviewed the proposed policy's provisions on vehicle affordability, imports, exports, localisation, safety and domestic manufacturing.

Government proposes 20% cap on car booking advances to curb on-money practices

According to draft policy documents made available to the media, the government plans to cap car booking advances at 20% and introduce measures to address on-money practices under the proposed five-year Auto Policy 2026Â?31.

The policy would protect the price agreed upon at the time of booking to prevent buyers from facing higher prices after placing orders. It also proposes additional requirements for used vehicle imports, including third-party inspections and after-sales service provisions, alongside other consumer protection measures.

The draft proposes recognising L6 and L7 urban mobility vehicles as alternatives to motorcycles, with an emphasis on increasing domestic production. From July 2027, manufacturers would be subject to phased and verifiable minimum domestic value addition requirements.

The policy also proposes adopting 45 additional United Nations Economic Commission for Europe (UNECE) vehicle safety regulations and establishing the Pakistan Automotive Testing Institute. The draft policy will be submitted to the Economic Coordination Committee of the federal cabinet for approval.