Pakistan’s New Automotive Policy Targets $25 Billion in Savings Through Local Manufacturing and EV Adoption

KARACHI — A draft of Pakistan’s proposed Automotive and Auto Parts Manufacturing Policy 2026–2031 projects approximately $25 billion in savings and related benefits over the next five years, according to a copy reviewed by Arab News. The initiative forms part of Islamabad’s broader push to expand local manufacturing, reduce vehicle imports, and preserve foreign exchange reserves.

The draft policy seeks to raise Pakistan’s automotive exports to $6 billion within five years. Currently, the sector exports roughly $190 million to $200 million annually, according to the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM). Islamabad has steadily liberalized commercial imports of used vehicles over the past year and is rolling back tariff protections across the auto industry as part of wider trade reforms tied to its National Tariff Policy and a $7 billion International Monetary Fund program.

Islamabad plans to submit the auto policy to the International Monetary Fund for review within days, said Hamad Ali Mansoor, Chief Executive Officer of the Engineering Development Board. Prime Minister Shehbaz Sharif has reportedly given his approval to the draft.

A copy of the draft reviewed by Arab News outlines plans to strengthen local manufacturing, cut imports of completely built units (CBUs), and conserve foreign exchange. The document estimates that local production could save $17.7 billion over five years, with electric vehicle adoption contributing an additional $6.9 billion in savings.

“The overall value addition is expected to generate savings of approximately $17.7 billion over the next five years compared with importing equivalent automobiles in completely built unit condition,” the draft states.

Pakistan is advancing its transport transformation under the New Energy Vehicle Policy (NEVP) 2025–2030, which targets a 30 percent share of electric vehicles in new vehicle sales by 2030.

“Reaching the 30 percent new-energy-vehicle sales target would yield added benefits, including $6.9 billion in fuel-import savings, utilization of surplus power, carbon credits, and public health gains,” according to the policy.

Pakistan spent $17 billion on petroleum imports during the last fiscal year, with 70 percent of that consumption attributed to petrol-powered vehicles—an increasingly uncompetitive segment as electric vehicles gain traction, Mansoor said.

Mahir Binci, the International Monetary Fund’s resident representative in Pakistan, did not respond to Arab News inquiries regarding whether the Fund had received the draft or whether it holds reservations on specific provisions.

The international lender is expected to raise objections to elements of the draft policy, which proposes sales tax rates of 1 percent for battery electric vehicles, 6 percent for range-extended EVs, and 9 percent for plug-in hybrids. The plan also calls for reduced import tariffs on EVs priced below $15,000 for two years and lower duties on EV components to spur adoption.

BYD EXPANSION

Meanwhile, China’s BYD is preparing to launch an assembly plant in Gharo, Sindh, to serve Pakistan’s market. The multinational manufacturer has partnered with independent power producer Hub Power Holdings Limited to introduce electric and hybrid vehicles and charging infrastructure across Pakistan.

BYD, however, has called for greater government support for new-energy-vehicle adoption.

“The proposed policy, pending cabinet approval and International Monetary Fund support, provides a framework for new-energy-vehicle adoption,” said Danish Khaliq, Vice President of Sales and Strategy at BYD Pakistan, in remarks to Arab News.

BYD’s assembly plant is expected to commission by the end of this year, Khaliq said.

“In the first phase, we will have a capacity of 25,000 vehicles per annum,” he said, adding that BYD plans to double annual production to 50,000 vehicles in the next phase.

“While we appreciate the export targets and push for local manufacturing, the government should help secure favorable free trade agreements to enhance global competitiveness and promote Pakistani exports,” he added.

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