The draft Pakistan Auto Policy 2026-31 would change the basis on which car makers and parts manufacturers earn government support: instead of incentives tied mainly to local assembly, the draft proposes mandatory export targets, customs penalties for firms that miss them, and rebates for firms that exceed them. It is the biggest proposed shift in the industry's direction in two decades.
Two things to be clear about before any of the numbers below. First, none of this is in force. The Prime Minister gave in-principle approval in September 2026, but the policy still requires Economic Coordination Committee and Cabinet approval, and discussions with the IMF ended without agreement — see our report on the latest Pakistan Auto Policy 2026-31 update. Second, the government has not published the draft, so every figure in circulation comes from reporting rather than from the document.
Even the policy's name is unsettled. The Senate Standing Committee on Industries and Production recorded it in July 2026 as the Automotive & Auto Parts Manufacturing Policy 2026-31. Press coverage also calls it the Auto Industry Development Policy, abbreviated AIDEP or AIDP. They are the same document.
Pakistan Auto Policy 2026-31 Introduces Mandatory Export Targets
Under the current model, an assembler's incentives depend largely on how much it builds here. The draft adds a second test: how much it sells abroad. Export performance stops being optional and becomes a condition.
The targets, as reported, apply to original equipment manufacturers and to Tier-1 parts suppliers, and cover cars, jeeps and SUVs, tractors, motorcycles, rickshaws and auto parts. The headline requirement for passenger-car OEMs is to raise exports to 12% of production value by FY2030-31, reported as equivalent to $596.1 million.
That pairing is more informative than either number alone. If $596.1 million is 12% of production value, the draft is assuming passenger-car production worth roughly $4.97 billion by FY31 — our arithmetic on the reported figures, not a government projection. Any assembler reading the target as a sales goal should read it as a production-scale assumption as well.
For the five-year total, reporting does not agree with itself. One mainstream account puts combined vehicle and auto-parts exports at $4.586 billion over the policy period; another gives $4.41 billion for 2026-31. The gap is $176 million, about 4%. We are not going to pick one and present it as settled.
Which Auto Companies Will Face Export Targets?
| Reported figure | What it covers |
|---|---|
| 12% of production value | Passenger-car OEM export requirement by FY2030-31 |
| $596.1 million | Reported value of that passenger-car requirement |
| $4.586 bn / $4.41 bn | Five-year vehicle and parts export total — two reported figures |
| Up to 15% | DLTL rebate for exporters (5% baseline, 10% incremental) |
Reported draft figures. None has been confirmed by a published policy document.
Note what the first two rows do to the third. If passenger cars account for $596.1 million of a $4.586 billion five-year total, that is just 13% of it. Most of the export burden the policy creates falls on tractors, bikes, rickshaws and — above all — the auto parts sector, which is the part of the industry with the least capital to spare.
Government Plans Penalties for Missing Export Targets
This is the part of the draft that has unsettled manufacturers, and it is the genuine news in the policy. Under the proposed framework, a firm that fails to meet its prescribed export target faces customs penalties linked to the size of the shortfall — in effect, losing tariff concessions in proportion to how far short it fell.
What has not been published is the formula. Nobody outside the ministries can currently say whether a firm missing its target by 2% pays 2% more duty, or something steeper, or whether there is a grace period, an appeal, or relief for market conditions outside a company's control. Those details decide whether this is a workable incentive or a trap, and they are exactly what is missing.
A penalty mechanism is also a different instrument from an incentive, and the distinction matters for a manufacturer's planning. An incentive you can decline. A penalty you cannot, which means export capability stops being a strategic choice and becomes a compliance cost — one the vendor industry has already said it is not resourced for, as covered in our report on auto industry concerns over the new policy.
DLTL Scheme Would Reward Higher Auto Exports
The other side of the mechanism is a rebate. The draft proposes support under DLTL — the Drawback of Local Taxes and Levies scheme — reported as a 5% baseline compensation on exports plus a further 10% on incremental exports, which is consistent with the "up to 15%" ceiling that reporting describes.
The structure is worth reading carefully, because the weighting is deliberate. Five per cent rewards exporting at all; ten per cent rewards exporting more than you did last year. The larger share of the money is attached to growth rather than to volume, which favours a firm starting from a small base over an established exporter standing still. For a parts maker with no export history, the incremental tier is the one that actually pays.
The Localisation Target Nobody Is Questioning
Here is the figure in the draft that deserves more scrutiny than it has had. The reported minimum domestic value addition target for passenger cars is 40% by FY2030-31, alongside 45% for light commercial vehicles, 80% for tractors, 90% for bikes and rickshaws, and 15% for new energy vehicles.
PAAPAM, which represents the parts makers, says local content in conventional vehicles is already above 50%, and has asked for a target of 70%. If both figures are right, then a target set five years out is ten percentage points below what the industry says it has already achieved — and thirty points below what the vendor sector is asking for.
That is the quiet tension inside a policy built around exports. A 40% floor is not a localisation target in any meaningful sense; it is a ceiling nobody has to climb. And the 15% figure for new energy vehicles sets the bar lower still, on the category the policy expects to grow fastest. We are reading the numbers rather than the intent here, and the ministries may have reasons they have not published — but on the figures as reported, the export side of this draft is ambitious and the localisation side is not.
Vendor Upgradation and Technology Transfer
The draft pairs its export obligations with support measures for suppliers: a vendor upgradation and technology transfer programme, modernisation of existing industrial clusters, and a dedicated export body for the sector. On that last point, reporting gives the body different names and no official source confirms any of them, so we will describe its function rather than invent its title — it is meant to handle export target administration, market access and trade promotion for the industry.
The direction is consistent with what the government has said elsewhere. At an August 2026 Planning Commission policy dialogue on automotive exports, the Minister for Planning argued the sector should move beyond the domestic market and called for five-year sector export plans — in the context of a $63 billion national export target, with no automotive-specific figure attached. The draft policy is the automotive-specific version of that. How the Ministry of Industries and Production and the Ministry of Commerce divide the work is not yet public, and it sits alongside Pakistan's industrial policies for the auto sector more broadly.
How the New Auto Policy Could Change Pakistan's Car Industry
Export targets do not arrive on their own. They come attached to a tariff reduction programme that would cut the weighted-average import tariff from 15.7% to 5.99% by 2030 — a reduction of about 62%. The logic is that a protected industry never becomes an exporting one, so protection falls as export obligations rise. The counter-argument from manufacturers is a structural cost disadvantage they put at roughly 34% against regional competitors, which tariff cuts worsen and export targets do not address. For the tariff side of this in detail, see how the tariff programme affects car duties.
There is a third pressure arriving at the same time. Rules on the commercial import of used cars have just been relaxed, while this policy is still unapproved. Manufacturers are being asked to take on export obligations and lower protection while the used-import channel widens — and that sequencing, more than any single number, is what the industry is objecting to.
When Will Pakistan Auto Policy 2026-31 Be Approved?
No date has been announced. The sequence so far: the previous policy framework expired on 30 June 2026; the Senate Standing Committee examined the draft in July; the Prime Minister gave in-principle approval in September; and IMF discussions on the draft ended without agreement, with more data requested. ECC and Cabinet approval are both still outstanding.
In practical terms that means the export targets, the penalties and the DLTL percentages in this article are all proposals, and the figures may change before anything is notified. For the IMF dimension specifically, see our coverage of what the IMF talks could change.
What This Means If You Are Buying a Car
Nothing yet, and that is the honest answer. Export targets and penalties sit between the government and manufacturers; they do not change a showroom price on their own. The part of this policy that would eventually reach a buyer is the tariff programme, and it is unapproved, phased to 2030, and still being negotiated. Anyone delaying a purchase in the hope of a duty cut is betting on a document that has not cleared two committees. What we would watch instead is the gap between the 40% localisation floor and the 50%-plus the vendor industry says already exists — because if that floor stands, parts availability for a car bought in 2027 will depend on commercial decisions rather than on a policy requirement. Meanwhile, our range of car accessories in Pakistan is model-specific rather than universal, whichever way the policy lands.
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