Prime Minister Shehbaz Sharif has approved the final draft of Pakistan's new Automotive Industry Policy, which will be submitted to the Federal Cabinet for consideration.

The policy aims to reduce vehicle prices, increase domestic manufacturing, improve safety standards, promote electric vehicle (EV) adoption and raise automotive exports from the current US$ 200 million to US$ 6 billion.

Adviser to the Prime Minister on Industries and Production Haroon Akhtar Khan announced the development at a press conference in Islamabad on Saturday, November 7th, alongside Federal Minister for Information and Broadcasting Attaullah Tarar. Khan said the policy had been finalised following consultations to address structural issues in Pakistan's automotive sector and develop its manufacturing and export capabilities.

He said successive automotive policies over the past decade had failed to achieve the expected growth in vehicle exports. The government has therefore prioritised exports, with manufacturers facing penalties if they fail to meet their targets.

Localisation and domestic manufacturing

Localisation is a priority under the proposed framework. Khan said increased domestic manufacturing would create employment, support industrial development and reduce import dependence.

The government aims to reduce reliance on completely built-up (CBU) units and move beyond assembling completely knocked-down (CKD) kits. Manufacturers will be encouraged to increase local content, develop domestic vendor industries and expand the automotive supply chain.This is expected to retain a greater share of economic value within Pakistan, reduce reliance on imported components and support wider industrial development.

Higher safety and quality standards

The policy also addresses vehicle safety and quality. Khan raised concerns over safety standards, particularly in imported used vehicles, citing accidents involving defective brakes, tyre failures and missing or non-functional safety features, including seat belts.

It includes 45 additional standards for locally manufactured vehicles to bring them closer to international quality requirements. Khan said these would establish more stringent requirements for vehicles manufactured in Pakistan. The government intends to ensure that vehicles sold in the domestic market comply with applicable safety standards.

Electric vehicle adoption and incentives

The proposed policy includes measures to increase EV adoption and reduce dependence on imported petroleum products. Khan said fluctuations in international oil prices increase Pakistan's import bill, pressure the current account and contribute to domestic inflation. Greater EV adoption could reduce petroleum imports and support the transition to electric mobility.

He said recent regional tensions had further highlighted the importance of electric mobility. The government has raised the financing limit for EV purchases to PKR 10 million (US$ 36,100) to encourage adoption and reduced import duties on EV charging stations. Khan also recalled that Prime Minister Shehbaz Sharif had launched the National Electric Vehicle Policy last year, adding that the government would provide updates on its implementation.

Advance payment cap and consumer protection

The proposed framework includes consumer protection measures, with the Prime Minister directing manufacturers not to demand advance payments exceeding 20% of a vehicle's price at the time of booking. The restriction aims to limit advance payment requirements and address additional charges commonly known as on-money. The government expects the policy to contribute to a gradual reduction in vehicle prices, although Khan said the benefits would primarily be felt by middle- and upper-income consumers. The framework also provides for third-party audits of government initiatives to improve transparency and accountability.

Tariff measures and export competitiveness

Khan said the National Tariff Policy would complement the automotive framework by reducing production costs through more affordable imports of raw materials and intermediate goods. Lower input costs are expected to help domestic manufacturers produce vehicles and other finished goods at more competitive prices while improving export potential.

The government aims to reduce the sector's dependence on imports and vehicle assembly by expanding local manufacturing and exports. The policy sets an automotive export target of US$ 6 billion, compared with the current level of approximately US$ 200 million.

Following the Prime Minister's approval, the final draft will be submitted to the Federal Cabinet for consideration before proceeding through the remaining approval stages and implementation.