The final draft of the new five-year auto policy has been submitted to Prime Minister Shehbaz Sharif for approval.
According to the draft, import duty on hybrid vehicles up to 850cc could be reduced from 50% to 30%. The same reduction has been proposed for hybrid vehicles with engine capacities ranging from 850cc to 1,500cc.
For hybrid vehicles between 1,501cc and 1,800cc, the government has proposed gradually reducing the duty to 20% over the next five years.
A 20% reduction in tax has also been proposed for hybrid vehicles above 1,800cc during the policy period.
The draft also includes duty reductions for commercial vehicles. Import duty on hybrid trucks could be reduced from 30% to 15%, while duty on high-roof commercial vehicles has been proposed to fall from 60% to 30%.
Similarly, the government has proposed reducing duty on hybrid buses from 30% to 15%.
The government says the incentives are intended to encourage the adoption of hybrid and other new vehicle technologies, strengthen local manufacturing and increase automotive exports.
Changes to the automobile import duty and tax structure have also been introduced during the current fiscal year. Under the Finance Bill 2026-27, import duties on vehicles in different engine categories were reduced.
According to the Federal Board of Revenue, some import schemes currently provide a 50% concession on duties and taxes for hybrid electric vehicles up to 1,800cc, while hybrid vehicles between 1,800cc and 2,500cc receive a 25% concession.
The proposed Auto Policy 2026-31 will come into force after approval by the prime minister and completion of the required government procedures. The proposals contained in the draft may therefore be revised before final approval.
