Import Duty on Cars above 1800cc may be cut from 156% to 74%

ISLAMABAD – Pakistan’s proposed Auto Policy 2026-31 could reshape country’s vehicle market, with import duties on cars set for steep reductions across all engine categories. The policy is not yet finalized, and there are ongoing debates, revisions to Special Excise Duty, IMF input, and inter-ministerial clashes. The current auto policy expires around mid-2026, adding urgency. The proposals reviewed by National Assembly Standing Committee on Finance and Revenue, tariffs on vehicles above 1800cc may plunge from 156% to 74%m which is one of biggest cuts under the draft policy. Duties on smaller vehicles could also fall significantly, ranging between 42% and 57% after implementation. The proposed changes extend beyond imported cars. Tariffs on auto parts are expected to drop from 61% to 45%, offering relief to local assemblers and manufacturers, while specialized vehicles may receive a modest reduction from 36% to 34%. The move sparked debate within government circles. While the draft policy offers substantial relief even for high-end vehicles, the Minister of State for Finance has maintained that the government’s goal is not to make luxury imports cheaper for elite buyers. With revisions to Special Excise Duty (SED) on luxury and electric vehicles also under discussion, all eyes are now on the Federal Board of Revenue (FBR), which must decide how these competing priorities will be reflected in the final Finance Bill 2026-27. If approved, the proposed tariff cuts could mark one of the most significant shifts in Pakistan’s automotive taxation framework in recent years. Consumers are set to gain from competitive pricing and better options, especially in imported and upper-mid segments. Local entry-level cars may see modest relief. The policy aims for long-term affordability through competition, but the exact magnitude depends on implementation details expected in the coming months. Pakistan’s auto sector has underperformed regionally due to protect