The government has proposed major reductions in import duties on hybrid vehicles, trucks and buses under the draft Auto Policy 2026-31, with the final document submitted to Prime Minister Shehbaz Sharif for approval. According to the draft, the new auto policy will remain in effect for five years and aims to attract investment, increase vehicle production and promote exports from the country’s automotive sector. The policy proposes reducing the duty on hybrid vehicles with engine capacities of up to 850cc from 50% to 30%. A similar reduction has been proposed for hybrid vehicles with engine capacities ranging from 850cc to 1, 500cc, with the duty to be brought down from 50% to 30%. For hybrid vehicles with engine capacities between 1, 501cc and 1, 800cc, the draft proposes a phased reduction in duty over five years, bringing it down to 20%. The government has also proposed a 20% reduction in the tax on hybrid vehicles with engine capacities above 1, 800cc over the five-year policy period. The draft also includes incentives for commercial vehicles. The duty on hybrid trucks is proposed to be reduced from 30% to 15%, while the duty on high-roof commercial vehicles could be cut from 60% to 30%. Similarly, the duty on hybrid buses is proposed to be reduced from 30% to 15%. The proposed incentives are aimed at encouraging the adoption of hybrid and other new vehicle technologies while strengthening local manufacturing and increasing automotive exports. The proposals come after the government introduced changes to the import duty and tax structure for vehicles under the Finance Bill 2026-27. According to the Federal Board of Revenue, certain import schemes currently offer a 50% concession on duties and taxes for hybrid electric vehicles up to 1, 800cc, while hybrid vehicles between 1, 800cc and 2, 500cc are eligible for a 25% concession. The final Auto Policy 2026-31 will take effect after approval by the prime minister and completion of the required government procedures. The proposals in the draft may therefore be revised before final approval. The government is also expected to settle tax-related matters with the International Monetary Fund in October, according to the draft policy documents.
Government proposes major duty cuts on hybrid vehicles and buses
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