Pakistan's draft Auto Policy 2026 to 2031 claims it can save the country about USD 25 billion over five years, close to Rs 7 trillion at the current exchange rate. The Engineering Development Board says the draft, already approved in principle by the Prime Minister, will be sent to the IMF within days. On the same day, 23 October 2026, BYD confirmed that its Gharo plant near Karachi will start with capacity for 25,000 cars a year and can later double to 50,000.
Here is where the USD 25 billion figure comes from, why the IMF review is the next big test, and what BYD's comments add.
The short version
- The draft projects savings of about USD 25 billion over the five year policy period
- About USD 17.7 billion would come from building cars locally instead of importing them fully built
- About USD 6.9 billion would come from lower fuel imports if new energy vehicles reach 30 percent of sales
- Auto exports are targeted to reach USD 6 billion over five years, against about USD 190 million to USD 200 million a year now
- The EDB chief executive says the draft goes to the IMF in a few days
- BYD says its plant will be commissioned by the end of the year with 25,000 units of annual capacity in phase one
Where the USD 25 billion comes from
| Source of saving | Five year estimate | Roughly in rupees |
|---|---|---|
| Local manufacturing instead of fully built imports | USD 17.7 billion | Rs 4.9 trillion |
| Lower fuel imports from 30 percent new energy vehicle sales | USD 6.9 billion | Rs 1.9 trillion |
| Total | About USD 24.6 billion, rounded to USD 25 billion | About Rs 6.8 trillion |
Rupee figures use the interbank rate of about Rs 276.8 per US dollar on 23 October 2026. They are the draft's own projections, not audited savings, and depend on sales and localisation targets actually being met.
The fuel argument is the one officials push hardest. Pakistan spent about USD 17 billion, around Rs 4.7 trillion, on petroleum imports in the last fiscal year, and roughly 70 percent of that fuel was used by petrol vehicles. Every car that switches to electric power or a plug in hybrid cuts that bill.
The manufacturing saving rests on more cars being assembled in Pakistan and on higher local content. That is where the policy is most contested. Parts makers say the draft's localisation targets are too low and the tariff cuts too fast, as covered in our report on PAAPAM's 15 percent tariff warning.
Why the IMF review matters
The Prime Minister has approved the draft, but it cannot take effect without IMF clearance because Pakistan is in an IMF programme and several measures cost tax revenue.
The tax breaks likely to draw the most questions are these.
- Sales tax of 1 percent on battery electric cars, 6 percent on range extended electric cars and 9 percent on plug in hybrids, against the standard 18 percent
- Lower tariffs for two years on electric cars priced under USD 15,000
- Cuts in duty on imported EV parts
- Customs duty on EVs worth up to USD 75,000 falling from 50 percent to 25 percent and then to 15 percent by 2030 to 2031
- A 10 percent federal excise duty on EVs priced above USD 75,000, which works in the other direction and raises revenue
The IMF has already pushed back on concessions for hybrids and EVs this year. Our earlier reports cover IMF objections to the auto policy, the GST rules for PHEVs and REEVs and the EV tax and booking rules.
If the Fund insists on higher sales tax, the projected savings from electric cars would shrink, because fewer buyers would switch. To offset lost revenue, the draft also relies on a new development levy on petrol and diesel cars, which we explain in our auto policy levy guide.
The export target
The draft wants auto exports to reach USD 6 billion, about Rs 1.66 trillion, over five years. Current exports are only about USD 190 million to USD 200 million a year. To force the pace, it sets export targets for assemblers with penalties for those who miss them, covered in our report on export targets and licence cancellation.
What BYD said
BYD Pakistan's vice president for sales and strategy, Danish Khaliq, said the policy supports the shift to new energy vehicles. He confirmed the Gharo plant will be commissioned by the end of 2026, with first phase capacity of 25,000 vehicles a year and a second phase that would take it to 50,000.
The capacity figures match what the company and its partner Hubco have said before. The new points are BYD backing the draft in public and its call for the government to sign free trade agreements, so that cars built in Pakistan can be exported at competitive prices. That links BYD's plans directly to the draft's export target.
For the plant itself, see our Gharo plant update and our report on why it will start on imported parts before localising. Current BYD prices are on our BYD page.
What it means for car buyers
The USD 25 billion figure is a national estimate and does not change any price today. What matters for buyers is whether the EV and hybrid tax cuts survive the IMF review.
- If they survive, electric cars and plug in hybrids should become clearly cheaper, as shown in our price estimates by model
- If the IMF forces higher rates, the gap between EVs and petrol cars will narrow
- Large petrol and diesel cars are likely to face higher charges either way
What happens next
- The EDB is set to send the draft to the IMF within days
- After the IMF review it goes to the Economic Coordination Committee and the federal cabinet
- The Commerce and Industries ministries are still split on the tariff structure, and the Prime Minister has been asked to decide
- BYD aims to commission its Gharo plant before the end of the year