Pakistan Announces Tax Relief for Cars Up to 1,000cc
Published On 10 Nov, 2026
9 News HD: Pakistan's new Auto Policy 2026–31 promises tax relief for small car owners, with vehicles having engine capacities of up to 1,000cc exempted from the proposed Automotive Development Levy (ADL).
Prime Minister Shehbaz Sharif has approved the draft policy after it received clearance from the International Monetary Fund (IMF). The government says the move is aimed at reducing the financial burden on middle- and lower-middle-income families who depend on smaller cars for daily travel.
Under the new policy, vehicles with engines of 1,000cc or less will not face the additional levy planned for larger conventional petrol vehicles. This means small-car owners will be protected from this extra tax.
The policy also brings changes for electric vehicle buyers. The government plans to increase the EV financing limit from Rs3 million to Rs10 million and extend the repayment period from three years to five years. These steps are intended to make electric vehicles more affordable for consumers.
Another important part of the policy is vehicle safety. Pakistan plans to introduce 45 additional safety standards under the United Nations WP.29 framework for locally manufactured and imported vehicles.
The government has also proposed measures to improve transparency in car bookings. Manufacturers will not be allowed to demand advance payments of more than 20 percent of a vehicle's price.
The policy sets a five-year export target of $6 billion for the automobile industry. It will now move forward for federal cabinet consideration.
For small-car buyers, the tax exemption is an important development, although its impact on vehicle prices will depend on the policy's implementation.
