The government did not make any significant announcements regarding the automotive sector in the FY27 budget, as the new auto policy is scheduled to take effect on July 1st following the expiry of the current policy.

In his budget speech recently, Finance Minister Muhammad Aurangzeb stated that the Auto Policy 2026-31 is currently being reviewed by the Prime Minister's committee, and its details will be presented to Parliament after receiving approval from the Prime Minister and the cabinet.

He stated that the incentive for the import of completely knocked-down (CKD) kits for electric vehicles, including two-wheelers, three-wheelers, cars and buses, has been extended until June 30th, 2027.

Currently, the import duty on CKD kits for electric vehicles is 1% on specific parts, 10% on non-localised parts, and 25% on localised parts. Similarly, a 25% import duty applies to completely built-up (CBU) electric vehicles.

An assembler, who requested anonymity, stated that there is also a lack of clarity regarding the General Sales Tax (GST), as many issues are expected to be addressed following the issuance of the FY27 Finance Bill and the announcement of the new auto policy.

Sources indicated that stakeholders have continued to advocate their respective positions to the government ahead of the finalisation of the new auto policy. In addition, imported electric trucks will be subject to a 1% sales tax. An automotive sector analyst stated that the current GST rate is higher and that the government aims to support infrastructure development under CPEC and other private-sector-led development projects.

Mr Aurangzeb announced that the Federal Excise Duty (FED) will be increased on imported vehicles with engine capacities ranging from 2,000cc to 3,000cc. The increase will also apply to imported electric vehicles priced above PKR 20 million (US$ 71,700). Furthermore, duties on imported vehicles with engine capacities exceeding 3,000cc will be increased.

An assembler stated that sales volumes within this category remain limited; however, some local assemblers continue to import such vehicles, as demand exists among higher-income consumers for higher-priced models.

The automotive sector recorded growth, supported by lower interest rates and increased consumer demand. Imports of new and used vehicles increased by 24% year-on-year during July-April FY26, while imports of semi-knocked-down (SKD) and CKD kits by local assemblers rose by 107% year-on-year during the same period. This trend indicates the possibility of higher vehicle sales in the coming months.

A used-car importer stated that, while the government intends to reduce regulatory duties and customs duties over the next five years in line with IMF requirements, the increase in FED on luxury vehicles could offset revenue losses resulting from lower customs and regulatory duties.

According to the Economic Survey FY26, the New Energy Vehicle Policy 2025-2030 aims to increase the adoption of electric and other new energy vehicles (NEVs) in Pakistan's transport sector. The policy targets NEVs accounting for 30% of new vehicle sales by 2030. The target includes electric motorcycles, scooters, rickshaws, cars, light commercial vehicles, buses and trucks.

To support adoption, the policy provides cost-sharing subsidies through the Pakistan Accelerated Vehicle Electrification programme, viability gap funding, and infrastructure development support. These measures are intended to facilitate the deployment of NEVs and related infrastructure across the country.