🚗 Quick answer: PM Shehbaz Sharif approved the draft Auto Policy 2026-31 on 20 October 2026, but it isn't in force yet. It still needs federal cabinet approval and IMF review. If it passes as reported, plug-in hybrids get the biggest price cut (roughly 8–13%), cars above 2,000cc like the Fortuner and Hilux get the biggest increase (7–10%), and most everyday cars from the Alto to the Civic move by 2% or less. Imported new and used cars should get gradually cheaper through 2031.
Key facts
- Status: draft approved by the PM on 20 October 2026. Next: federal cabinet, IMF review, then the law changes needed for new tax rates. The old policy expired on 30 June 2026.
- Sales tax (proposed): battery EVs 1%, range-extended EVs 6%, plug-in hybrids 9%, regular hybrids and petrol/diesel cars 18%.
- New Automotive Development Levy: 0% up to 1,000cc, 2% for 1,001–2,000cc, 10% above 2,000cc. Expected to raise over Rs232 billion in five years.
- Tariffs: average tariff cut to 15% over the policy period. Small imported EVs under $15,000 pay 5% for two years.
- EV loans: limit raised from Rs3 million to Rs10 million, term from three to five years.
- Already happened: hybrid sales tax jumped from 8.5% to 25% on 1 July, then fell to 18% on 13 September 2026. Some hybrid prices swung by more than Rs1.5 million.
خلاصہ: وزیراعظم شہباز شریف نے 20 اکتوبر 2026 کو آٹو پالیسی 2026-31 کے مسودے کی منظوری دی، لیکن یہ ابھی نافذ نہیں ہوئی۔ اسے وفاقی کابینہ اور آئی ایم ایف کی منظوری درکار ہے۔ مسودے میں الیکٹرک گاڑیوں پر 1 فیصد، پلگ اِن ہائبرڈ پر 9 فیصد، اور عام ہائبرڈ اور پیٹرول گاڑیوں پر 18 فیصد سیلز ٹیکس ہے۔ نئی آٹوموٹو ڈویلپمنٹ لیوی 1000 سی سی تک صفر، 1001 سے 2000 سی سی تک 2 فیصد، اور 2000 سی سی سے بڑی گاڑیوں پر 10 فیصد ہوگی۔ ہمارے اندازے کے مطابق آلٹو، کلٹس اور ایوری کی قیمت تقریباً وہی رہے گی، کرولا، سٹی اور سوک زیادہ سے زیادہ 2 فیصد مہنگی ہو سکتی ہیں، فارچیونر اور ہائلکس 7 سے 10 فیصد مہنگی ہو سکتی ہیں، اور پلگ اِن ہائبرڈ 8 سے 13 فیصد سستی ہو سکتی ہیں۔
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Where Does the New Auto Policy Stand?
Approved in draft, not yet law. Pakistan's previous auto policy expired on 30 June 2026, and the industry has worked without one since. Carmakers have said the gap made it hard to plan production, investment and prices (ProPakistani). On Tuesday 20 October 2026, Law Minister Azam Nazeer Tarar and Industries Adviser Haroon Akhtar presented the draft to Prime Minister Shehbaz Sharif, who approved it (Dawn). The PM's office hasn't published the text, so everything below comes from press reports of the draft.
| When | What happened |
|---|---|
| Auto Development Policy 2021-26 expires. | |
| Budget 2026-27 takes effect: lower duties on several imported car categories; hybrid sales tax concession ends (8.5% → 25%). | |
| September 2026 | PM gives in-principle approval to the draft; it goes for IMF review. |
| FBR cuts sales tax on locally assembled hybrids up to 2,000cc from 25% to 18% (SRO 1525(I)/2026). | |
| PM approves the draft Auto Policy 2026-31 and sends it to the federal cabinet. | |
| Next | Federal cabinet approval, IMF endorsement, then a Finance Act amendment or FBR notifications for the tax changes. No dates announced. |
That last step matters for prices. A policy document on its own doesn't change what you pay at the showroom. Sales tax rates and a new levy only apply once they're written into law or notified by FBR, so nothing below takes effect the day the cabinet approves it.
What's in the Draft Auto Policy 2026-31?
Five things affect car prices directly: sales tax by vehicle type, a new levy by engine size, lower import tariffs, bigger EV loans, and export and localisation rules for carmakers.
1. Sales tax by vehicle type
The draft sets lower sales tax for cleaner cars, for both locally assembled and imported vehicles (Geo News, Dawn):
| Vehicle type | Proposed sales tax | What it is |
|---|---|---|
| Battery electric (BEV) | 1% (2026-31) | Runs on battery only, e.g. BYD Atto 3, Hyundai Ioniq 5 |
| Range-extended EV (REEV) | 6% | Electric drive, with a petrol engine that only charges the battery |
| Plug-in hybrid (PHEV) | 9% | Petrol engine plus a battery you can charge from a socket |
| Regular hybrid (HEV) | 18% | Self-charging hybrid, e.g. Corolla Cross HEV, HR-V e:HEV |
| Petrol and diesel (ICE) | 18% | Everything else, from the Alto to the Fortuner |
Electric cars valued above $75,000 would also pay 10% federal excise duty, and the draft lets FBR add higher excise duty on petrol and diesel cars above 2,000cc. Earlier drafts had proposed 9% for regular hybrids too, but the version the PM approved leaves them at 18%, where they've been since 13 September.
2. A new Automotive Development Levy
The draft adds a levy charged as a percentage of the car's price, to fund export incentives and upgrades for parts makers. It's expected to raise more than Rs232 billion over five years (Dawn). Reported rates, for both local and imported cars (Geo News):
| Engine size | New Automotive Development Levy | Existing NEV Adoption Levy (since 2025) |
|---|---|---|
| Up to 1,000cc | 0% | 1% |
| 1,001–1,300cc | 2% | 1% |
| 1,301–1,800cc | 2% | 2% |
| 1,801–2,000cc | 2% | 3% |
| Above 2,000cc | 10% | 3% |
| Buses, trucks, prime movers | 2% | n/a |
Petrol and diesel cars already pay a New Energy Vehicle Adoption Levy of 1–3%, set in 2025 (Profit). The reports don't say whether the new levy replaces it or is charged on top. That's the single biggest unknown for car prices, so we show both cases below.
3. Lower import tariffs
The draft cuts the average tariff to about 15% by the end of the policy, phases out special customs concessions (SROs and the Fifth Schedule), and gives small imported EVs costing under $15,000 a 5% tariff for the first two years. Non-localised EV parts and kits would pay 1%. The September draft also set a path for imported new cars (CBU) to reach 35–45% duty for cars up to 1,500cc by 2030-31 (Geo News). More on that in the imports section.
4. Bigger EV loans
The State Bank would raise the financing limit for new energy vehicles from Rs3 million to Rs10 million and the maximum term from three to five years. See the financing section for what that does to a monthly instalment.
5. Export and localisation targets
Carmakers and parts makers would have to hit export targets worth $6.01 billion over five years, rising from $256.6 million in 2026-27 to $2.19 billion in 2030-31. Exporters get 5% of export value back, plus 10% on growth over the previous year. Miss targets for two years running and a maker's manufacturing certificate can be cancelled. These rules don't change prices directly, but they add costs and incentives that carmakers will pass on in one direction or another.
What Has Already Changed in 2026?
Hybrid prices have already been on a rollercoaster. The 8.5% concessional sales tax on hybrids expired on 30 June, and from 1 July they were charged 25% (Profit). Carmakers raised prices over the summer. Then on 13 September, FBR cut the rate for locally assembled hybrids up to 2,000cc to 18% (Daily Pakistan), and prices came back down, though not all the way.
| Model (ex-factory) | Before the hike | At 25% tax | After the cut to 18% |
|---|---|---|---|
| Hyundai Elantra Hybrid | Rs9,895,000 | Rs11,400,000 (+Rs1.51m) | Rs10,761,000 (−Rs639,000) |
| Hyundai Tucson Hybrid Smart FWD | Rs11,220,000 | Rs12,926,000 (+Rs1.71m) | Rs12,202,000 (−Rs724,000) |
| Toyota Corolla Cross HEV | n/a | Rs9,849,000 | Rs9,299,000 (−Rs550,000) |
| Toyota Corolla Cross HEV X | n/a | Rs10,299,000 | Rs9,729,000 (−Rs570,000) |
| Honda HR-V e:HEV | n/a | Rs10,369,000 | Rs9,299,000 (−Rs1.07m) |
Sources: Hyundai's 12 August revision (DrivePK) and its current list price; Toyota's cut effective 13 September (Profit); Honda's cut for orders invoiced from 25 September (Daily Pakistan). "n/a" means we didn't find a reliable pre-July price.
🧮 Why this matters for the new policy: Pakistani ex-factory prices include sales tax, so a tax change moves the price almost exactly in proportion. Hyundai's numbers show it: Rs11,400,000 ÷ 1.25 × 1.18 = Rs10,761,600, within Rs600 of the new list price. We use the same arithmetic for the estimates below. Because the draft keeps regular hybrids at 18%, the September cut is the hybrid tax cut. Don't wait for another one.
Which Car Prices Go Up and Which Go Down?
It depends mostly on engine size and how the car is powered. If the draft passes as reported, plug-in hybrids get about 8–13% cheaper, cars above 2,000cc get about 7–10% more expensive, small cars up to 1,000cc stay the same or get up to 1% cheaper, and most 1,001–2,000cc petrol cars and hybrids rise by 0–2%. Here's the full picture:
| Segment | Examples | Expected change | Why |
|---|---|---|---|
| Plug-in hybrids (PHEV) | Kia Sorento PHEV, Haval H6 PHEV, MG HS PHEV, Jaecoo J7 PHEV | ↓ about 8–13% | Sales tax falls to 9% |
| Range-extended EVs | Any REEVs launched locally | ↓ about 10–15% | Sales tax falls to 6% |
| Battery EVs | BYD Atto 3, Hyundai Ioniq 5 / 6 | → held low; small imported EVs ↓ | 1% locked in until 2031; 5% tariff for imports under $15,000 |
| Small cars up to 1,000cc | Suzuki Alto, Every, Cultus | → 0% to −1% | Exempt from the new levy |
| 1,001–1,300cc petrol | Suzuki Swift, Honda City 1.2 | ↑ about 1–2% | 2% levy, versus 1% now |
| 1,301–2,000cc petrol | Yaris, Corolla, Civic, City 1.5, Fronx, Elantra | → 0% to +2% | 2% levy, versus 2–3% now |
| Regular hybrids up to 2,000cc | Corolla Cross HEV, HR-V e:HEV, Elantra / Tucson Hybrid | → 0% to +2% | Sales tax stays 18%; 2% levy |
| Above 2,000cc | Toyota Fortuner, Hilux Revo, Land Cruiser Prado | ↑ about 7–10% | 10% levy, versus 3% now, and possibly higher excise duty |
| Imported new and used cars | Japanese imports, CBU SUVs | ↓ gradually to 2031 | Tariffs and regulatory duty phased down |
The ranges for petrol cars come from the levy question: the low end assumes the new levy replaces the existing NEV levy, the high end assumes it's charged on top. The PHEV range depends on whether a given PHEV pays 18% or 25% today. Reports conflict on whether locally assembled PHEVs were included in the September cut.
How Much Will Each Car's Price Change?
Here's what the draft's levy would do to the price of Pakistan's most popular cars. "Today" is the maker's listed ex-factory price as of 30 September 2026 (Toyota's Corolla prices were unchanged by the 20 October facelift), compiled from the makers' own websites (Pakera). On-road prices add withholding tax, registration and insurance.
How we calculated these estimates
For a change in the levy, the price moves by roughly the same percentage. For a change in sales tax, we divide out the old rate and apply the new one:
Levy change: new price ≈ price × (1 + change in levy)
Sales tax change: new price = price × (1 + new rate) ÷ (1 + old rate)
Example: a Corolla 1.6 MT at Rs6,099,000 with 2% added comes to about Rs6,221,000. A Rs18,999,000 plug-in hybrid moving from 18% to 9% sales tax comes to Rs18,999,000 × 1.09 ÷ 1.18 ≈ Rs17,550,000.
| Car (engine) | Price today | If new levy replaces old | If new levy is added on top |
|---|---|---|---|
| Suzuki Alto VXR (658cc) | Rs2,994,861 | ≈ Rs2,965,000 (−Rs30,000) | No change |
| Suzuki Cultus VXR (998cc) | Rs4,089,490 | ≈ Rs4,049,000 (−Rs41,000) | No change |
| Suzuki Swift GL (1,197cc) | Rs4,460,160 | ≈ Rs4,505,000 (+Rs45,000) | ≈ Rs4,549,000 (+Rs89,000) |
| Honda City 1.2LS (1,199cc) | Rs4,737,000 | ≈ Rs4,784,000 (+Rs47,000) | ≈ Rs4,832,000 (+Rs95,000) |
| Toyota Yaris 1.3 GLi MT (1,329cc) | Rs4,649,000 | No change | ≈ Rs4,742,000 (+Rs93,000) |
| Suzuki Fronx GL 5MT (1,462cc) | Rs5,999,999 | No change | ≈ Rs6,120,000 (+Rs120,000) |
| Toyota Corolla 1.6 MT (1,598cc) | Rs6,099,000 | No change | ≈ Rs6,221,000 (+Rs122,000) |
| Toyota Corolla Altis Grande 1.8 CVT (1,798cc) | Rs7,669,000 | No change | ≈ Rs7,822,000 (+Rs153,000) |
| Toyota Corolla Cross HEV (1,798cc) | Rs9,299,000 | No change | ≈ Rs9,485,000 (+Rs186,000) |
| Honda HR-V e:HEV (1,498cc) | Rs9,299,000 | No change | ≈ Rs9,485,000 (+Rs186,000) |
| Honda Civic RS (1,498cc turbo) | Rs10,100,000 | No change | ≈ Rs10,302,000 (+Rs202,000) |
| Toyota Hilux Revo (2.8 diesel, from) | Rs12,329,000 | ≈ Rs13,192,000 (+Rs863,000) | ≈ Rs13,562,000 (+Rs1.23m) |
| Toyota Fortuner (2.7 petrol, from) | Rs12,435,000 | ≈ Rs13,305,000 (+Rs870,000) | ≈ Rs13,679,000 (+Rs1.24m) |
| Toyota Land Cruiser Prado (from) | Rs61,500,000 | ≈ Rs65,805,000 (+Rs4.3m) | ≈ Rs67,650,000 (+Rs6.15m) |
Plug-in hybrids work differently, because their change comes from sales tax, not the levy. Take the Kia Sorento 1.6 Turbo PHEV AWD at Rs18,999,000. If it pays 18% today and drops to 9%, the price falls to about Rs17.55 million (−Rs1.45 million). If it pays 25% today, it falls to about Rs16.57 million (−Rs2.43 million). The same arithmetic applies to the Haval H6 PHEV, MG HS PHEV and Jaecoo J7 PHEV once their current tax status is confirmed.
⚠️ How to read these numbers: they're our estimates of the policy's effect alone, assuming carmakers pass the levy and tax changes on in full and nothing else changes. Carmakers sometimes absorb part of a tax change, or round prices to the nearest Rs1,000s. The rupee's exchange rate, inflation (10.3% in September), freight and steel prices will move prices too, and any of those can outweigh a 2% levy. Nothing here is an official or announced price.
Will Imported and Used Cars Get Cheaper?
Yes, but gradually, and the first cuts have already happened. Budget 2026-27 cut duties on several imported car categories from 1 July. For example, duties and taxes on an 1,800cc imported car fell from about 156% to 74%, and on an 850cc car from 66% to 42% (Geo News). The new policy continues in the same direction. The September draft set these customs duty targets for imported new cars by 2030-31 (Geo News):
| Imported new car (CBU) | Customs duty by 2030-31 (September draft) |
|---|---|
| Up to 850cc | 35% |
| 851–1,000cc | 40% |
| 1,001–1,500cc | 45% |
| 1,501–1,800cc | 77% |
| Above 1,800cc | 115% |
| Regular hybrids (CBU) | 15% |
The same draft removes regulatory and additional customs duties by 2030-31. The October reports confirm the direction (an average tariff of about 15%) but not every rate, so treat this table as the plan, not the final law.
Used imports: the old Personal Baggage scheme was abolished in January 2026 (SRO 61(I)/2026), leaving Gift and Transfer of Residence with stricter rules (Dawn). Commercial imports of used cars up to five years old have been allowed since October 2025, but with an extra 40% regulatory duty. The September draft phases that out by 2030. As it falls, imported used cars get cheaper, which also puts pressure on the prices of local used cars of the same models.
The catch: imported cars are priced in yen or dollars. A 10% fall in the rupee raises the landed cost by more than a 10-point duty cut lowers it. If you plan to import, our currency converter helps you track the landed cost.
What Changes for Car Loans and EV Financing?
EV buyers could borrow more, for longer. Under the draft, the State Bank would raise the financing limit for new energy vehicles from Rs3 million to Rs10 million, and the maximum term from three to five years (Dawn). Here's what that looks like at an illustrative 15% interest rate:
| Loan | Monthly instalment | Total interest |
|---|---|---|
| Rs3,000,000 over 3 years (today's limit) | Rs103,996 | Rs743,855 |
| Rs3,000,000 over 5 years | Rs71,370 | Rs1,282,187 |
| Rs5,000,000 over 5 years | Rs118,950 | Rs2,136,979 |
| Rs10,000,000 over 5 years (new EV limit) | Rs237,899 | Rs4,273,958 |
A longer term cuts the instalment by about a third, but on Rs3 million it adds about Rs538,000 in interest. Most car loans in Pakistan are KIBOR-linked, so the rate itself depends on the State Bank. Its next decision is on 26 October; our SBP rate decision preview covers what a hold or cut would mean. For lender-by-lender comparisons, see our car loan guide, and try your own numbers in the EMI calculator.
What Could Still Change Before It's Final?
- The IMF. In June 2026 the IMF rejected a similar plan to charge 1% sales tax on EVs and 9% on hybrids. It prefers an 18% rate on all vehicles, with any support paid as direct subsidies (ProPakistani). The reduced EV and PHEV rates are the part most at risk.
- Local industry pushback. The parts makers' association (PAAPAM) says the policy favours assemblers and imports. Its chairman warned it "will make Pakistan an import destination country with no local industrial base in the auto sector" (Dawn).
- The levy's design. Whether it replaces or adds to the existing NEV levy, whether hybrids and PHEVs pay it, and when it starts all decide the numbers above.
- Timing. Tax changes usually arrive with a budget (1 July) or a mid-year FBR notification. Nothing in the reports sets a start date.
Should You Buy a Car Now or Wait?
For most buyers, the policy isn't a reason to wait. Here's how we'd think about it by segment:
- Small car (Alto, Every, Cultus): the policy changes your price by less than Rs45,000. Interest rates and the rupee matter far more. Buy when it suits your budget.
- 1,000–2,000cc petrol or hybrid (City, Yaris, Corolla, Civic, Corolla Cross): the worst case is about +2%. With inflation at 10%, a few months' general price creep can cost as much. Hybrids already got their tax cut in September.
- Above 2,000cc (Fortuner, Hilux, Prado): this is where timing could matter. If the 10% levy passes, buying before it takes effect could save Rs0.9–1.2 million on a Fortuner or Hilux. Ask your dealer whether a booking locks today's price: with many Pakistani assemblers, only full payment protects you from a later increase.
- Plug-in hybrid: waiting could save 8–13% if the 9% rate survives IMF review, but that's the least certain part of the policy. If you need the car now, don't pay "own money" (a premium over the list price) for one.
- Electric car: the 1% rate and larger loans make EVs cheaper to own. Before you buy, check charging at home and work, and the warranty on the battery.
- Selling a used car: as import duties on used cars fall over the next few years, resale values of popular models could soften. If you're planning to sell anyway, there's no reason to hold out for higher prices.
Whatever you buy, set a budget that covers the full on-road price and a few months of instalments. Our emergency fund guide explains why a car loan shouldn't eat into your safety net.
Key Terms Explained
- Auto Policy 2026-31
- Pakistan's five-year automotive industry policy for July 2026 to June 2031, also called the Automotive Industry Development Policy (AIDP) or AIDEP 2026-31. It sets tariffs, taxes, localisation and export rules for carmakers.
- Battery electric vehicle (BEV)
- A car that runs only on a battery charged from the grid, with no petrol engine. Proposed sales tax: 1%.
- Range-extended electric vehicle (REEV)
- An electric car with a small petrol engine that only charges the battery and never drives the wheels. Proposed sales tax: 6%.
- Plug-in hybrid electric vehicle (PHEV)
- A car with a petrol engine and a battery that can be charged from a socket, able to drive some distance on electricity alone. Proposed sales tax: 9%.
- Hybrid electric vehicle (HEV)
- A self-charging hybrid that charges its battery from the engine and braking and cannot be plugged in. Sales tax: 18%.
- Automotive Development Levy (ADL)
- A new levy proposed in the Auto Policy 2026-31, charged as a percentage of a vehicle's price: 0% up to 1,000cc, 2% for 1,001–2,000cc and 10% above 2,000cc.
- New Energy Vehicle (NEV) Adoption Levy
- A levy on petrol, diesel, CNG and LPG vehicles introduced in 2025: 1% below 1,300cc, 2% for 1,300–1,800cc and 3% above 1,800cc.
- CBU and CKD
- CBU (completely built-up) is a car imported fully assembled. CKD (completely knocked down) is a kit of parts imported and assembled in Pakistan.
- Ex-factory price
- The price a carmaker lists before freight, insurance, withholding tax and registration. In Pakistan it includes sales tax.
Sources
This article uses press reports of the draft Auto Policy 2026-31 up to 22 October 2026, FBR notifications as reported in the press, and makers' listed prices. The government has not published the policy text. Price estimates are HisaabKaro's calculations, not official prices, and nothing here is financial advice.
- Dawn: Draft auto policy sent to cabinet (21 October 2026)
- Geo News: Auto Policy 2026-31 proposes lower tariffs, GST rates on electric, hybrid vehicles (21 October 2026)
- ProPakistani: New Auto Policy Launch Very Close (20 October 2026)
- Geo News: PM approves auto policy 2026-31 linking incentives to exports, localisation (10 September 2026)
- Geo News: National Assembly approves Budget 2026-27 with revised duties
- Profit: Hybrid vehicles face 25% sales tax from July 1
- Daily Pakistan: Which cars will get cheaper after FBR's hybrid tax cut?
- Profit: Toyota cuts Corolla Cross prices by up to Rs570,000
- Daily Pakistan: Honda HR-V e:HEV, Toyota Corolla Cross new prices after GST cut
- DrivePK: Hyundai hybrid prices rise after tax hike
- Pakera: Car prices in Pakistan, October 2026 (makers' listed prices)
- Profit: FBR notifies new adoption levy on ICE vehicles
- ProPakistani: IMF rejects proposed 1% sales tax on electric vehicles
- Dawn: Used car imports through 'personal baggage' abolished
Update Log
- : first published, two days after the PM approved the draft. We'll update this page when the federal cabinet decides and when FBR publishes the levy and sales tax rates.