Petrol and diesel vehicle buyers in Pakistan could face additional costs under the proposed Auto Policy 2026-31, which includes a new levy on conventional vehicles. The plan aims to promote electric vehicles and support the country’s automobile industry.
Prime Minister Shehbaz Sharif approved the draft policy on October 20, 2026. However, it still requires further approvals before the proposed measures can take effect.
Under the proposal, cars with engine capacities between 1,001cc and 2,000cc would face a 2% Automotive Development Levy, while vehicles above 2,000cc would face a 10% levy. Cars up to 1,000cc would be exempt from this charge. The proposed rates cover imported and locally assembled conventional vehicles.
The levy could increase the cost of some petrol and diesel vehicles if manufacturers pass the additional charge on to buyers. However, the final price impact will depend on the approved policy and other changes to vehicle taxes and import duties.
The government plans to use the new policy to encourage electric vehicle adoption, increase local production and target $6 billion in auto sector exports over five years. For buyers, the final policy will determine whether conventional vehicles become more expensive or benefit from other proposed tax reductions.
