The government is moving ahead with a major overhaul of auto sector tariffs under the National Tariff Policy (NTP), as policymakers debate steep duty reductions that could significantly reshape vehicle pricing and industry competition in Pakistan.

Commerce Secretary Jawad Paul told the National Assembly Standing Committee on Finance that proposed tariff changes for FY2026–27 are being aligned with the NTP framework, which prioritises gradual trade liberalisation and reduced protection for domestic industries.

Under the plan presented to lawmakers, customs duties on cars, jeeps, and auto parts could be reduced by 25% to 50%, potentially lowering the maximum tariff ceiling from 156% to around 74% over time. Officials said this would likely make vehicles cheaper for consumers but intensify competition for local assemblers.

The secretary said the reform process is still in line with the approved policy and involves phased reductions across thousands of tariff lines, including vehicles of different engine capacities and auto components. He added that the government aims to progressively reduce tariffs further in the coming years under the five-year NTP roadmap.

However, the policy is still under discussion due to differences within government institutions and concerns raised by the International Monetary Fund (IMF), which has not fully endorsed some proposed measures. These disagreements have delayed final approval of the new Auto Policy 2026–31.

Sources said one key issue is how quickly tariffs should be reduced, with competing proposals including direct cuts under the NTP framework or alternative measures such as introducing federal excise duties to offset revenue losses while maintaining protection for local industry.

The current auto policy expires on June 30, putting pressure on authorities to finalise a new framework alongside the federal budget process. Officials warned that delays could make timely implementation difficult.

According to the NTP roadmap, tariffs on various vehicle categories—including small cars up to 800cc and larger vehicles above 1,800cc—will be gradually reduced, while duties on auto parts are also set to decline in phases, with a long-term target of significantly lower average tariffs by 2030.

The Commerce Secretary also informed the committee that the second-year tariff reductions could result in an estimated revenue impact of Rs143.4 billion.

He further noted that the Engineering Development Board has proposed equal tariff treatment for imported, locally assembled, and used vehicles to ensure fair competition across the auto market.