• PHEVs may see price reductions of over 20pc under proposed tax changes
• Petrol, hybrid vehicles may become around 8-10pc cheaper
• Parts makers warn rising CBU imports, lower tariffs to hurt local industry
KARACHI: The draft Auto Policy 2026-31 could trigger one of the biggest shake-ups in the country’s automobile market, with prices of some vehicles potentially falling by more than 20 per cent.
However, the prospect of cheaper cars may create an unusual predicament, as buyers are likely to hold back purchases in anticipation of lower prices, causing anxiety among automakers over the value of their existing inventory.
According to Topline Securities, the new draft maintains the 1pc general sales tax (GST) rate on battery electric vehicles (BEVs), while setting rates at 9pc for plug-in hybrid vehicles (PHEVs) and 6pc for range-extended electric vehicles (REEVs). The earlier draft had proposed a uniform 1pc GST across all new energy vehicles (NEVs), while the previous policy imposed rates of 8.5pc to 12.75pc on PHEVs.
This points to the government’s priority to incentivise the rollout of NEVs, particularly BEVs.
Preliminary industry estimates suggest conventional petrol vehicles could become approximately 8-10pc cheaper, while hybrid electric vehicles (HEVs) may see reductions of around 9pc. PHEVs could benefit even more, with estimated price reductions exceeding 20pc.
Among BEVs, models with import values below $15,000 could see reductions of approximately 22pc compared to around 8pc for higher-priced BEVs. However, REEVs may become around 3pc more expensive under the proposed tax structure.
The new draft proposes reducing tariffs on localised completely knocked-down (CKD) parts to 15pc by FY31 from 25pc previously. Topline Securities said the reduction could be detrimental to the local vendor industry, adding that the benefits were likely to be passed on to consumers amid intense competition.
Parts makers sound alarm
Pakistan Association of Automotive Parts and Accessories Manufacturers (PAPAAM) Chairman Abdur Rehman Aizaz said the new auto policy amounted to a “conspiracy to destroy several industries”.
He said rising imports of new and used cars were already hurting the developed local auto parts industry, which now faced the threat of closures because of government policies.
Mr Aizaz pointed out that imports of completely built-up (CBU) new cars rose to 2,407 units in September from 391 in August, while imports of used cars increased to 2,454 units from 1,185 over the same period.
He said every new or used imported vehicle reduced potential volumes for the country’s 1,200 local auto parts manufacturers. Locally produced parts accounted for approximately Rs1.5 million of the value of each domestically assembled vehicle, he added.
On that basis, the 4,861 CBU vehicles imported in September represented an estimated Rs7.3 billion in lost revenue for local parts manufacturers, Mr Aizaz said.
Industry representatives said the GAC Aion UT, currently priced at around Rs6.4m, could fall to Rs5m-Rs5.2m. Higher-priced electric SUVs such as the BYD Atto 3 and GAC Aion V, priced at around Rs9m, could also see meaningful reductions.
They said popular petrol and hybrid models could become more affordable as well. Industry estimates indicate potential savings of around Rs600,000 to Rs800,000 on selected variants of the Honda HR-V e:HEV, Haval Jolion and Toyota Corolla Altis.
The biggest absolute reductions could emerge in the PHEV segment. A Jaecoo J7 PHEV, priced near Rs10m, could potentially fall to around Rs8m, while the Kia Sorento PHEV, which has already witnessed substantial price adjustments, could face further downward pressure from changes in GST and import duties.
Sania Irfan of Topline Securities said the new draft proposed a zero per cent automotive development levy (ADL) on fossil fuel-driven vehicles below 1,000cc, 2pc on 1,000-2,000cc vehicles and 10pc on those above 2,000cc, replacing the earlier draft’s rates of 4.5-5.5pc across engine categories.
Kalbe Ali in Islamabad also contributed to this report
Published in Dawn, October 22nd, 2026