Pakistan’s federal government has put the proposed Auto Policy 2026-31 on hold after strong objections from leading car manufacturers. The draft, prepared by the Ministry of Industries and Production, aimed to speed up the shift to electric vehicles (EVs). Officials wanted to cut the country’s heavy reliance on imported oil, which makes up nearly 80% of its petroleum needs. Recent Middle East tensions made this goal more urgent.
Major automakers, however, warned that the policy favoured EVs too heavily. They said it created an unfair advantage for electric vehicles without a clear plan for the existing industry. Leading companies met Prime Minister Shehbaz Sharif and asked for a review. The Prime Minister then stopped the draft and asked Deputy Prime Minister Ishaq Dar to lead a new committee that will prepare a revised version.
The delay has already raised costs. The previous Auto Industry Development and Export Policy 2021-26 ended on 30 June 2026. Tax benefits for hybrid vehicles ended with it. From 1 July, the General Sales Tax on hybrids and plug-in hybrids rose from 8.5% to 25%, the same rate as petrol and diesel cars. Toyota and Honda raised hybrid prices by more than Rs 1.3 million on some models. A few makers also paused invoicing and deliveries because of the uncertainty.
Parts makers, represented by the Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM), support a move toward electric mobility but want a gradual approach. They suggest keeping GST on hybrids at 18% until charging stations and local EV supply chains improve. They also want EV incentives linked to higher local production of batteries, motors and parts so that existing factories and jobs stay protected.
The new policy is expected to balance clean-energy goals with the needs of local manufacturers and investors.