Pakistan has set a $6 billion automotive export target for 2026-2031 and made domestic manufacturing a central condition of its new industry policy, aiming to save $17.7 billion in foreign exchange by replacing imported vehicles and components with locally produced alternatives. The Autos and Auto Parts Manufacturing Policy 2026-2031 marks a shift from import-dependent assembly towards export-oriented production, with auto parts manufacturers expected to generate 55 per cent of the targeted exports, Adviser to the Prime Minister on Industries and Production Haroon Akhtar Khan said on Wednesday.
The policy targets approximately $3.29 billion in auto parts exports and $2.72 billion from automobile manufacturers over five years. Khan said the framework reflects Prime Minister Shehbaz Sharif's vision of export-led economic growth and was designed to strengthen local industry, create jobs and integrate Pakistani manufacturers into global automotive supply chains.
Under the policy, automakers will face binding minimum domestic value addition requirements to ensure that market expansion translates into greater local production and investment. Companies failing to meet the prescribed requirements will face an additional three-percentage-point customs duty on relevant non-localised completely knocked-down (CKD) imports in the following financial year, subject to the prescribed legal process.
The government has also earmarked Rs2.1 billion for a Vendor Upgradation and Technology Transfer Programme to support around 2,200 auto parts manufacturers. Implemented through the Engineering Development Board (EDB) and the Small and Medium Enterprises Development Authority (SMEDA), the programme will support technology upgrades, skills development, access to common manufacturing facilities and international quality certification.
The policy also targets investment in at least five major auto parts manufacturers to develop domestic production clusters. To promote exports, eligible manufacturers will receive support equal to 5 per cent of net free-on-board export value under the Drawback of Local Taxes and Levies scheme, along with an additional 10 per cent incentive on qualifying incremental exports.
Manufacturers will also be required to secure export opportunities through the global supply chains of their international principals. The policy links import concessions to local manufacturing commitments.
A 5.0 per cent customs duty on imported battery electric vehicles priced up to $15,000 during the first two years will be conditional on companies establishing local assembly or manufacturing facilities and starting commercial production of the imported model by September 30, 2028. The government projects $17.7 billion in foreign exchange savings over the policy period compared with importing equivalent vehicles in completely built-up condition.
Greater adoption of new energy vehicles is also expected to avoid imports of 1.823 million tonnes of oil. Khan said the policy will also encourage contract manufacturing to utilise existing industrial capacity, with idle capacity estimated at 41-80 per cent.
He said the ultimate objective is to build a competitive domestic manufacturing base capable of generating exports, attracting investment, reducing import dependence and creating sustainable employment.