Government weighs tax changes in new auto policy to lower vehicle prices

KARACHI: The government is considering changes to the duties and taxes structure in the upcoming auto policy to make vehicles more affordable for the middle class, according to Engineering Development Board (EDB) Chief Executive Officer Hammad Ali Mansoor.

Speaking at a media briefing on Monday, Mansoor said Prime Minister Shehbaz Sharif wanted vehicles to become more cost effective for middle-income buyers. He said the proposed auto policy had been sent to the ministry for onward presentation to the prime minister and was expected to be announced on July 1.

Mansoor said three small electric vehicles in completely built-up form were expected to arrive in Karachi during the third quarter of this year. He added that this would be followed by work on setting up large assembly plants in Karachi and Lahore.

According to the EDB chief, the initial price of these vehicles would be below Rs1 million.

Mansoor also said no assembler had asked for an extension in the current policy. While he did not share further key features of the upcoming framework, he said the prime minister’s emphasis remained on making small cars affordable for the middle class.

He said the sharp rise in petrol and diesel prices had encouraged more buyers to turn to electric vehicles, adding that sales of electric vehicles had tripled in March.

He further said the electric vehicle market could change significantly in the coming months as two to three lithium battery manufacturers were expected to begin operations this year.

Auto parts concerns raised

During the briefing, auto sector expert Mashood Ali Khan told the EDB chief that auto parts manufacturers were facing a decline despite a rise in the number of vehicle assemblers.

He said one issue was that new entrants were importing localised parts that attracted 25pc import duty, while continuing to bring in parts through CKD kits by paying 15pc customs duty. He stressed that the new auto policy should give priority to small and medium-sized auto parts manufacturers, which he described as the backbone of the economy, and said the government must ensure actual manufacturing in Pakistan rather than only assembly.

Mixed sales trend in March

Buyers showed mixed behaviour in purchasing new cars, vans, pickups and SUVs amid the US-Israel war against Iran.

Pak Suzuki’s sales fell 23pc in March to 6,250 units, compared to 8,160 units in February. However, its sales in the first nine months of FY26 rose 32pc year-on-year to 65,706 units.

Hyundai Nishat posted sales of 928 units in March, down 9pc from 1,021 units in February, while its 9MFY26 sales increased 33pc year-on-year to 9,682 units.

Indus Motor Company recorded a 1pc increase in March sales to 3,873 units from 3,817 units in February. Its total sales in 9MFY26 climbed 54pc year-on-year to 33,313 units.

Honda Atlas Cars Limited and Sazgar Engineering registered month-on-month increases of 10pc and 3pc respectively, with March sales reaching 2,324 units and 1,734 units, compared to 2,114 units and 1,682 units in February.

In July-March FY26, Honda Atlas sold 20,097 units and Sazgar sold 12,630 units, with both showing 57pc year-on-year growth.

Overall, total sales of cars, vans, pickups and SUVs declined 9pc in March on a month-on-month basis, but increased 40pc year-on-year. For 9MFY26, total sales rose 43pc year-on-year to 144,029 units.