Why you should wait before buying a car this month

November 12, 2026 (MLN): Walk into any car showroom in Pakistan this month, and the question is the same: buy now, or wait?

The answer may be sitting in a government file. The final draft of the auto policy estimates that a BYD Seagull could fall from PKR 5.34m to PKR 3.62m. A Suzuki Cultus could fall from PKR 4.27m to PKR 3.84m. Only one car on the government’s list is likely to get dearer: the Toyota Fortuner.

But the file has not left the Prime Minister’s office yet, and after that, it still needs the IMF’s consent.

Pakistan's Automotive and Auto Parts Manufacturing Policy 2026-31 is ready but not yet announced. According to sources close to the matter who spoke to Mettis Global, the final committee report now awaits the Prime Minister's approval and then the government's sign-off after consent from the IMF.

The documents, reviewed by Mettis Global, rests on two pillars: export enhancement and local value addition. It cuts sales tax on new energy vehicles (NEVs) to as low as 1%, phases tariffs on completely built-up (CBU) cars down to 15% by FY31, and puts carmakers under binding export targets backed by penalties and the threat of licence cancellation.

The policy has passed through four high-level committees since the first draft reached the Prime Minister on June 2. A Deputy Prime Minister-led committee endorsed revisions, but its tariffs exceeded the limits under the National Tariff Policy. A committee under the Minister for Power then held 14 sessions with economists to realign tariffs. The final legal review sat with a committee convened by the Minister for Law and Justice, which also included the Ministers for Power, Climate Change and EAD, the Adviser to the PM on Industries, the Finance, Commerce and Industries Secretaries, and the FBR Chairman.

Sources said the committee has also prepared the legal documents, an Automotive Development Levy (ADL) Bill, a DLTL framework and a standard agreement with OEMs.

What the policy proposes

Exports: $6bn target, with carrots and sticks

The policy sets a cumulative five-year auto-sector export target of $6.01bn. OEMs account for $2.72bn under Mandatory Export Targets (MET), and parts makers for $3.29bn. Annual exports are projected to rise from $256.6m in FY27 to $2.19bn in FY31.

For cars, SUVs, jeeps and double cabins, the export target starts at zero in FY27, then rises to 5% of factory-gate production value in FY28, 10% in FY29 and 15% in FY30 and FY31. Tractors start at 5% in FY27 and reach 20%. Bikes and rickshaws rise from 5% in FY28 to 20% by FY31.

Exporters get a baseline 5% of net FOB value under the DLTL scheme. They get an additional 10% on incremental exports if exports grow more than 5% over the previous year. OEMs that miss their targets face a penalty of 1% to 3% of annual production value, and missing targets for two consecutive years cancels the manufacturing certificate.

A new levy on bigger ICE cars pays for it

The export incentives are funded by an Automotive Development Levy on internal combustion engine (ICE) vehicles. The proposed rates are:

This projects ADL collection of PKR 232.77bn over five years, against PKR 168.34bn of spending. DLTL payouts make up PKR 131.7bn of that spending, with a 20% contingency and smaller amounts for vendor development, a Pakistan Automotive Testing Institute, R&D and third-party evaluations. The committee calls the scheme "fiscally positive with a large margin", projecting net savings of PKR 64.42bn. Annual savings turn negative from FY30, as DLTL payouts outgrow the levy.

Local value addition

Each vehicle category gets yearly Minimum Domestic Value Addition Requirement (MDVAR) targets. For new OEMs (production from 2016 onwards) making ICE cars and SUVs, MDVAR rises from 20% in FY27 to 40% in FY31. Old OEMs must raise value addition by 2% a year, reaching 10% more by the end of the policy. OEMs that miss MDVAR lose export incentives and 3 percentage points of concession on non-localised parts imports.

Tariffs fall to 15% by FY31

Customs duty on CBU cars falls sharply in FY27 and converges to 15% for all ICE car categories by FY31. Duty on cars above 1800cc drops from 100% to 50% in FY27, and on cars up to 850cc from 50% to 30%. Additional customs duty and regulatory duty are phased out by FY29.

Duty on non-localised CKD parts for cars falls from 30% to 10% in FY27 and 5% by FY31. Localised CKD parts fall from 46% to 30-40% in FY27, and 15% by FY31. For parts makers, duty on ICE sub-assemblies drops to 5%, and on components and sub-components to 2.5%; NEV parts pay 1%. SRO regimes and the Fifth Schedule of the Customs Act are to be phased out by the end of the policy.

NEVs get the biggest tax break

Sales tax on NEVs, currently 18%, drops to 1% for battery electric vehicles (BEVs), 6% for range-extended EVs (REEVs) and 9% for plug-in hybrids (PHEVs). The rates apply to both local and imported units. All inputs for NEV assembly and parts making are exempt from sales tax under the Sixth Schedule.

Small imported EVs under $15,000 CIF get a 5% tariff for the first two years. EV-specific non-localised parts pay 1%. The SBP is proposed to raise the NEV financing limit from PKR 3m to PKR 10m, with tenor extended from three to five years.

FED and the levy will be used to narrow the price gap between NEVs and ICE vehicles above 1000cc. ICE vehicles above 2000cc and NEVs above $75,000 will pay higher FED. Whether the current 30-40% FED on imported CBUs continues, and whether it extends to local assembly, has been left to the FBR.

What it does to car prices

The committee's own estimates show imported EVs and PHEVs gaining the most. Comparable small ICE cars also get cheaper, through lower CKD duties.

The Toyota Fortuner is the only model that gets dearer, as the 10% levy on cars above 2000cc kicks in. Conventional hybrids such as the Sportage HEV are taxed as ICE vehicles, at 18% sales tax plus 5% proposed FED and 2% ADL.

Enforcement and safety

The OEM contract will bind carmakers to MDVAR, export targets, information disclosure and buyer protection timelines. The FBR's PCA will audit DVA targets and DLTL payments twice a year, alongside third-party audits. The policy also adopts 62 + 45 WP-29 safety regulations for local and imported vehicles.

The National Action Plan sets an Export Facilitation Council for November 2026. ADL and DLTL legislation, a binding export regime, MDVAR adoption and the NEV credit limit are due by December 2026. A Motor Vehicle Industry Development Bill is due by February 2027.

Who wins: PHEV makers and parts importers

A senior industry official told Mettis Global that PHEV makers and CKD assemblers relying on imported parts stand to gain the most.

He pointed to Sazgar's Haval PHEV and Tank PHEV, which currently pay 18% sales tax. Under the new regime, that drops to 9%, giving them relief from the current tax regime.

The second big gain, he said, goes to CKD assemblers who mostly import parts, naming Sazgar, Hyundai, Changan and Kia. "Sazgar is importing almost 100%," he said, adding that these assemblers would benefit considerably from lower import duty on parts.

Toyota, Honda and Suzuki will also gain from lower duty on imported parts, he said, but get no sales tax advantage on their ICE line-up.

He expects the sales tax gap to shift demand within the same showroom. "Those who have PHEV models, their sales will increase," he said. Sazgar sells both a hybrid and a PHEV, and the PHEV was already the bigger seller. "Now PHEV sales will rise further and hybrid sales will start to drop."

Jaecoo and Omoda gain mainly on imported parts rather than on sales tax, he said, though their PHEV models would also benefit.

What comes next

The committee's way forward has two steps: approval of the policy document by the Prime Minister, then approval by the government after consent from the IMF. According to sources close to the matter, the policy has yet to be formally announced.

The timing matters, because the National Action Plan already has November and December 2026 deadlines for the Export Facilitation Council, the ADL and DLTL laws and the export regime. Until the policy is notified, buyers weighing a hybrid against a PHEV or a small EV, and assemblers planning CKD imports, are left waiting on prices that the expected to fall by up to a third.

For listed automakers, the draft changes the earnings story. Assemblers with PHEV models and a high share of imported parts get both lower duties and lower sales tax. Legacy ICE makers get duty relief on parts but face export targets from FY28, MDVAR increases, and a 2% to 10% levy on cars above 1000cc.

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