The federal government has delayed finalizing the Auto Industry Development and Export Policy 2026-31 after a ministerial committee failed to reach an agreement on tariff rates for imported vehicles despite holding several meetings this week.
The committee, led by Power Minister Sardar Awais Leghari, examined revised proposals submitted by the Ministry of Industries and Production. While the ministry lowered some of its earlier tariff recommendations, it continued to advocate significantly higher import duties than those proposed under the National Tariff Policy in a bid to shield local automakers.
According to the latest proposal, customs duty on imported vehicles with engine capacities between 1,500cc and 1,800cc would stand at 60 percent by 2030, compared with the 15 percent target under the National Tariff Policy. Although the proposed rate is around 34 percent lower than the current tariff, it remains four times higher than the level envisioned under the government’s tariff reform plan.
For vehicles with engine capacities of 1,001cc to 1,500cc, the ministry has proposed a 45 percent customs duty by 2030, while imported vehicles above 1,800cc would attract a 75 percent duty.
The ministry argued that stronger tariff protection is necessary to support domestic manufacturers until structural challenges, including high taxation, energy prices, exchange rate volatility, and financing costs, are addressed.
It has also proposed reducing customs duties on imported parts and CKD kits covered under SRO 655 to encourage local parts production and reduce reliance on imports.
Separately, the proposal recommends federal excise duty of up to 60 percent on larger internal combustion engine vehicles, while vehicles in the 800cc to 1,000cc segment would face a 9.5 percent FED.
The committee also remained divided over export obligations for automakers and penalties for companies that fail to achieve export targets. Meanwhile, the Ministry of Commerce has suggested a one-year transition period before lower tariff rates are implemented.
Leghari said the committee is working to finalize the policy at the earliest but added that further analysis is required before a final framework can be approved.
