Prime Minister Shehbaz Sharif has approved the draft of Pakistan’s Automotive and Auto Parts Manufacturing Policy 2026-31, with the federal cabinet expected to review it for final approval soon, according to sources.

The new policy will remain in effect for five years and is designed to guide the development of Pakistan’s automotive industry. The previous policy expired on June 30, 2026, leaving manufacturers without a new long-term framework for investment and production planning.

The proposed policy focuses on boosting local manufacturing, attracting investment, expanding vehicle and auto-parts exports, and improving the competitiveness of Pakistani manufacturers in international markets.

It also aims to increase the use of locally produced auto parts in global supply chains and encourage the adoption of electric vehicles. These measures are intended to strengthen domestic production and help the industry compete in export markets.

The draft also proposes gradually reducing automobile tariffs. The proposed changes could affect competition and vehicle prices, although the impact will depend on the final measures approved by the government.

An inter-ministerial committee led by the law minister reviewed the draft and recommended changes to the policy framework. The committee proposed seven broad principles to restructure the sector, along with export targets intended to increase Pakistan’s share of international automotive markets.

The new framework is also expected to give automakers and parts manufacturers greater clarity when making investment, production and technology decisions.

The prime minister’s approval clears the draft for the next stage of the process, but the policy is not yet final. The federal cabinet’s approval will determine the final provisions and the timeline for implementation.