The Pakistan auto parts industry is objecting loudly to the draft Auto and Auto Parts Policy 2026–31. The objection is to tariff cuts that would expose local component makers to imports.
One correction to how this is being framed, though. The direction was published sixteen months ago, in the government's own policy document.
The Direction Was Settled Last Year
We went to the primary document rather than the coverage. The Ministry of Industries and Production hosts its own draft NEV policy, and it is explicit.
That official draft policy document says special duty regimes under the Fifth Schedule to the Customs Act, 1969 will be phased out by 2030.
It also says preferential sales tax on localised components will be gradually withdrawn by 2030.
Then its action plan goes further. It instructs the revenue authority to bring sales tax on imported parts at par with the rate applied to locally manufactured parts.
Those three words, "at par", are the whole dispute. Equal treatment removes the advantage local parts currently hold.
The official launch release said the same about the existing tariff facility. It continues until 2026, then phases out gradually by 2030.
So the 2026–31 draft sets the numbers. It did not set the direction, and the direction was on a government website in June 2025.
Who Is Actually Objecting
This matters for how you read the figures being quoted this week.
The widely shared piece setting out the industry's alarm is an opinion article. Its author is identified as a former chairman of the auto parts manufacturers' association.
It carries no government response. That does not make it wrong, and an industry veteran knows the sector better than most.
But it is advocacy rather than reporting. Every figure in it is the industry's own case for its own position.
Different outlets also carry different numbers for the same risk. So we are attributing these claims rather than stating them.
What the Industry Says Is at Stake
On the industry's own account, the sector comprises about 1,200 manufacturers.
It puts direct employment near 300,000 and indirect employment at about 1.8 million. It values investment at around four billion dollars.
It gives domestic production as six billion dollars for 2026, and annual tax contribution as Rs600 billion.
Two of those deserve a second look. Spread across 1,200 firms, 300,000 jobs averages about 250 people per manufacturer.
And the claimed indirect-to-direct ratio works out at six to one, which is high for this kind of manufacturing.
The Export Number Is the One to Look At
The same piece gives export revenues as 190 million dollars, and calls them stagnant.
Set that against six billion dollars of production and the ratio is stark. The industry exports roughly three percent of what it makes.
That one number explains both sides of this argument at once.
It is why tariff cuts are existential for local parts makers. Almost all their revenue depends on a protected home market.
It is also the government's strongest argument. Four decades of protection has not produced an export business.
Neither side's version of this story leads with it, which is a pity, because it is the heart of the matter.
The Duty Gap Does Two Opposite Things
Here is where the reporting gets the arithmetic wrong by not doing any.
The duties reported for petrol and diesel parts move like this. Treat them as draft figures, because they are.
| Parts duty | Now | 2026–27 | 2030–31 |
|---|---|---|---|
| Localised | 46% | 30% | 15% |
| Non-localised | 30% | 10% | 5% |
| Gap in points | 16 | 20 | 10 |
| Gap as a ratio | 1.5× | 3.0× | 3.0× |
Look at the two bottom rows. They say opposite things, and both are correct.
In percentage points the protective gap widens next year, from sixteen to twenty. It only narrows at the end of the period.
As a ratio, protection doubles immediately and stays doubled. Localised parts keep a duty three times the non-localised rate.
So the first step is more protective in relative terms, even though both rates fall.
Which view matters depends on how a manufacturer costs its parts. That is a real question, and nobody is asking it.
What the Official Draft Actually Contains
We read the Ministry's draft in full, including its action plan appendix. Several widely quoted figures are simply not in it.
There is no minimum domestic value addition requirement anywhere in that document. The staged ten, fifteen and twenty percent figures being quoted do not appear.
There is no localisation percentage target for new energy vehicles either.
Nor are there duty rates for the various electrified vehicle types. The reported sales tax tiers are not in the published text.
The piece making these claims says itself that only leaked drafts are circulating, which fits what we found.
So treat two categories separately. There is what the government has published, and there is what is reported from drafts nobody outside the process has seen.
What Counts as an NEV, and Which Cars Miss Out
This part is official, and it is the most useful thing in the whole policy for ordinary buyers.
The draft groups battery electric, plug-in hybrid, range-extender and fuel-cell vehicles together as NEVs.
For two- and three-wheelers, only fully battery electric machines count. A hybrid motorcycle would not qualify.
For cars and larger vehicles, a plug-in hybrid qualifies only on a condition. It must manage at least fifty kilometres in pure electric mode on one charge, with no tailpipe emissions.
And ordinary hybrids are excluded outright. A hybrid you cannot plug in is not an NEV under this definition.
That is a significant line. A great many hybrids now sold here sit entirely outside the framework.
A range-extender, such as the locally assembled Deepal S05, sits inside it. The powertrain label on the badge decides which side of the line a car falls.
The Levy on Petrol Cars Nobody Is Discussing
While attention sits on parts duties, the published draft contains a levy on conventional vehicles. It is banded by engine size.
| Vehicle | Proposed levy |
|---|---|
| Two- and three-wheelers | 1% |
| Cars below 1300cc | 1% |
| 1300cc to 1800cc | 2% |
| Above 1800cc | 3% |
| Buses and trucks | 1% |
Notice the step at 1300cc. A car just under that line pays one percent, and a car just over it pays two.
A few cubic centimetres double the levy. Banded thresholds always create these cliffs, and buyers near a boundary feel them.
This sits in the published document rather than in a leak, which makes it firmer than most of what is being reported.
Two Official Names for One Policy
A small thing that is not small. The government calls this policy two different things.
The launch press release names it the National Electric Vehicle Policy. The Ministry's own policy document names it the New Energy Vehicles Policy.
Those are not the same scope. Electric vehicle suggests battery cars alone, while new energy vehicles expressly covers plug-in hybrids and range-extenders too.
The policy document is the authoritative text, and its definition is the broader one. We have used that.
The Contradiction at the Centre of It
Government and industry describe the same factories in opposite terms.
The official launch release says locally produced goods run thirty to forty percent cheaper than imported alternatives.
The industry says its manufacturers carry a thirty-four percent structural cost disadvantage.
Both cannot be true of the same thing, and in fairness they are not describing the same thing.
The government's figure appears in a passage about two- and three-wheeler localisation. The industry's covers the wider parts sector.
So anyone quoting either number across the whole industry is misreading it. That caveat is missing wherever we saw them used.
The same confusion surrounds localisation itself. The draft reports ninety percent for motorcycles and rickshaws, and fifty percent for cars.
Coverage repeats the ninety and drops the fifty. For car parts, fifty is the number that counts.
Where It Stands Now
Nothing here is law. The policy has not been notified and the rates could change before it is.
The Prime Minister approved a draft in principle in September and asked for revisions. It has since gone for lender review.
We covered that stage in detail in our auto policy approval update, including why the revenue question is the sticking point.
Reported figures also disagree with each other. The eventual weighted average import tax has been put both below six percent and at about seven point four percent for 2030.
We have no official figure for either, so we are giving you the range rather than choosing.
Final Thoughts
The parts industry's alarm is understandable, and its three percent export share explains it better than any of its own figures do. A sector that sells almost everything at home cannot shrug off a tariff reset.
But the reset was not sprung this week. Phasing out preferential treatment by 2030 has been on a government website since June 2025, and the current draft argues about how fast, not whether. Until a notification appears, every rate in circulation is a proposal.
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Frequently Asked Questions
Why is Pakistan's auto parts industry concerned about the new policy?
Because lower import duties would let imported components compete on closer terms. Local makers have built capacity behind decades of tariff protection. Equal treatment for imported and local parts removes the margin that structure depends on.
Is this a new government decision?
Not in direction. The Ministry's own published draft already says preferential duty regimes and preferential sales tax on local components go by 2030. The present argument is about the pace and the exact rates, not about whether it happens.
What are the proposed auto parts import duties?
Reported drafts put localised parts on a path from 46 to 30 and then 15 percent. Non-localised parts go from 30 to 10 and then 5. These are draft figures from unpublished documents. No notification sets them.
Do those cuts reduce protection for local parts?
Less simply than it looks. In percentage points the gap actually widens next year, from sixteen to twenty, before narrowing to ten. Measured as a ratio it doubles and stays there. Both readings are correct, which is why the effect is argued over.
What is NEV localisation in Pakistan?
It means building electrified vehicle components here rather than importing them, including batteries, motors and controllers. Worth noting that the published draft sets no localisation percentage for these vehicles. Figures circulating on that point come from drafts that have not been released.
Does my hybrid count as a new energy vehicle?
Only if you can plug it in. The draft excludes ordinary hybrids altogether, and a plug-in car qualifies only if it covers at least fifty kilometres on electric power alone. Battery, range-extender and fuel-cell vehicles are included.
How localised is Pakistan's auto parts industry already?
The draft gives two very different figures. Motorcycles and rickshaws are about 90 percent localised, while cars sit at roughly 50 percent. Coverage tends to quote the first and omit the second, though the car figure is the relevant one here.
How much does the industry export?
On its own figures, about 190 million dollars against six billion dollars of production. That is close to three percent. It is the clearest measure of how much the sector depends on the domestic market.
Will car prices fall because of this?
Nobody can say yet, because no rate is final. Lower duties reduce landed cost, but exchange rates, local taxes and company pricing all sit in between. Wait for a notification before planning around any number.
Has Pakistan finalised the Auto Policy 2026–31?
No. A draft received approval in principle in September, revisions were ordered, and lender review followed. Committee clearance, cabinet approval and a ministry notification are still outstanding, so no figure in circulation is a notified rate.
