IMF Gives Green Light to Pakistan’s New Auto Policy

Pakistan has secured the International Monetary Fund's (IMF) clearance for its new automotive policy, with Prime Minister Shehbaz Sharif approving the Autos and Auto Parts Manufacturing Policy 2026-31 after the global lender raised no objections to the draft.

Key points

• 11 Children Rescued From Burning Van on Major Motorway Nov 11, 2026 10: 16 pm.
• Changan Announces Limited-Time Offers on Nevo Hunter and Deepal S05 Nov 11, 2026 5: 21 pm.
• Key Interchange at M2 Motorway Closed Nov 12, 2026 10: 31 am.
• The administration seeks to generate approximately $6.01 billion in cumulative automotive exports between 2026 and 2031.
• New energy vehicles (NEVs) will additionally face progressively higher localization requirements, reaching 25 percent for cars and SUVs and 30 percent for motorcycles and rickshaws by 2030-31.

In practice, the policy targets approximately $6 billion in cumulative automotive exports over five years and introduces mandatory localization and export requirements for manufacturers.

Notably, the administration will now introduce a capital bill, effectively a mini-budget, in Parliament after obtaining federal cabinet approval. Textile Industry Faces Growing Pressure to Go Green. Policy Projects $17.7 Billion In Foreign Exchange Savings.

In practice, the administration projects cumulative foreign exchange savings of approximately $17.7 billion during 2026-31 compared with importing equivalent vehicles in completely built up (CBU) condition. Rose adoption of new energy vehicles is additionally projected to avoid imports of approximately 1.823 million tons of oil over the policy period.

Notably, the policy further intends to improve industrial capacity utilization through contract manufacturing, with existing capacity estimated to be between 41 percent and 80 percent idle.

Meanwhile, the administration aims a midterm review in 2028, alongside periodic monitoring and corrective measures to ensure manufacturers meet their commitments. Two-year Deadline Before losing Manufacturing Licenses.

Notably, the administration seeks to generate approximately $6.01 billion in cumulative automotive exports between 2026 and 2031. While automobile manufacturers are anticipated to generate the remaining $2.72 billion, auto parts manufacturers are projected to contribute $3.29 billion, representing 55 percent of the target.

Under the proposed Drawback of Local Taxes and Levies (DLTL) scheme, eligible exporters will receive backing equivalent to 5 percent of net free on-board export value, with an further 10 percent available for qualifying incremental exports. Toyota Finally Reveals All-Electric bZ7 Sedan.

Manufacturers that fail to meet their export obligations could face penalties ranging from 1 percent to 3 percent of annual factory gate sales. Two consecutive years of noncompliance could result in cancellation of their manufacturing certificates, except in cases of force majeure.

Automakers will additionally be required to secure export opportunities through the global supply chains of their international principals. New Policy Shifts Focus to Local Manufacturing.

Adviser to the Prime Minister on Industries and Production Haroon Akhtar Khan remarked the policy marks a shift from import dependent vehicle assembly toward export-oriented manufacturing, greater localization, and internationally competitive production.

Pakistan at present has approximately 2, 200 auto parts manufacturers. The policy intends to strengthen their technological capabilities and integration into international supply chains through a Vendor Upgradation and Technology Transfer Program (VUTTP). It carries an allocation of Rs. 2.1 billion.

Meanwhile, the program will be implemented through the Engineering Development Board (EDB) and the Small and Medium Enterprises Development Authority (SMEDA), focusing on technology upgrades, manufacturing facilities, skills development, quality certification, and export readiness.

At least five anchor firms are targeted for investment during the policy period. Automakers will additionally be required to backing local vendors through technology transfers and quality improvements. Automakers Face Mandatory Localization Targets.

Meanwhile, the policy requires original equipment manufacturers (OEMs) to maintain existing domestic value addition for individual vehicle models. Manufacturers already achieving localization levels of 50 percent to 65 percent cannot reduce them simply since lower minimum thresholds apply to other businesses.

Existing OEMs must growth domestic value addition by 2 percent annually, equivalent to a cumulative rise of 8 percent over the policy period. By 2030-31, minimum localization targets will reach 40 percent for internal combustion engine cars and SUVs, 45 percent for light commercial vehicles, 80 percent for tractors, and 90 percent for motorcycles and rickshaws. Private Sector Bank Loans Jump 3, 700%.

New energy vehicles (NEVs) will additionally face progressively higher localization requirements, reaching 25 percent for cars and SUVs and 30 percent for motorcycles and rickshaws by 2030-31. Failure to meet applicable targets can result in an extra three percentage points of customs duty on relevant non-localized completely knocked down (CKD) imports in the after financial year, subject to the prescribed legal process. Import Concessions Linked to Local Production.

In practice, the policy provides for customs duty reductions over five years, alongside mandatory localization and export commitments. Battery electric vehicles (BEVs) valued at up to $15, 000 will qualify for a concessional 5 percent customs duty during the first two years, provided importers establish domestic assembly or manufacturing facilities.

Firms must submit a surety bond and an irrevocable bank guarantee covering the customs duty differential. They must additionally commence commercial production of the imported BEV variant by September 30, 2028. Failure to meet this deadline will result in the encashment of bank guarantees.

Original equipment manufacturers that do not sign agreements with the Engineering Development Board covering localization, exports, and other performance requirements will not qualify for concessional tariffs on imported parts. Stay Connected with ProPakistani.

Obtain the latest automobile news, car launches, bike reviews, videos and analysis wherever you prefer. Follow on Google Discover. Follow on Google News Join WhatsApp. See more ProPakistani stories in Google Search and Top Stories.

For now, IMF Gives Green Light to Pakistan's New Auto Policy remains the part of the story worth watching, and further updates are likely as more details are confirmed.