New auto policy proposes tax cuts on import of vehicles

ISLAMABAD: The federal government has proposed a major reduction in duties and taxes on hybrid vehicles as part of the draft Auto Policy 2026–31, according to official documents and sources.

The final draft of the five-year policy has been submitted to Prime Minister Shehbaz Sharif for consideration and approval.

Under the proposed policy, import duties on hybrid vehicles would be reduced gradually over the next five years. For hybrid vehicles above 1,800cc, taxes are proposed to be cut by 20%, while the duty on vehicles above 1,801cc could decline from 50% to 30%.

For hybrid vehicles in the 1,501cc–1,800cc category, the proposed duty would also be reduced from 50% to 30% through a phased five-year reduction.

The draft further proposes lowering duties on smaller hybrid vehicles. Duties on vehicles between 851cc and 1,000cc, as well as those with engines up to 800cc, could be reduced from 50% to 30% over the policy period.

The government is also considering substantial duty cuts for hybrid commercial vehicles. The proposed duty on hybrid trucks could fall from 30% to 15%, while duties on hybrid light commercial vehicles (LCVs) may be reduced from 60% to 30%.

Similarly, the duty on hybrid buses is proposed to decrease from 30% to 15% over five years.

The proposed measures are aimed at encouraging the adoption of fuel-efficient and hybrid vehicles while gradually reforming Pakistan’s automotive import and taxation structure.