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Minister Industries Reveals More Details on the New Auto Policy 2021-26

The Federal Minister of Industries and Production, Khusro Bakhtiar, has made some important announcements regarding the all-new auto policy 2021-26 in a press conference today. While speaking to the media, Minister Bakhtiar shared the following additional features of the new auto policy:

  • The government has introduced measures to increase the production of vehicles to approximately 300,000 (3 Lac) in the current fiscal year and up to 500,000 (5 Lac) by 2025. Furthermore, localization of auto parts shall be heavily incentivized.
  • Affordable Small Cars (Meri Gari Scheme) – To make small cars more affordable for the mid-tier socio-economic class, the following steps have been introduced in the financial budget 2021-22:

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  • Reduction in Car Prices:
    • ACD and FED on all cars have been reduced.
    • Price reduction is expected in each vehicle category being manufactured locally. The prices of cars are expected to be reduced as under:
      • Decrease of Rs. 104,458 – Rs. 142,388 in the prices of cars below 850 cc
      • Decrease of Rs. 112,118 – Rs. 186,375 in the prices of cars from 1001-1500 cc
      • Decrease of more than Rs 169,958 in prices of cars in 1800cc category
      • Decrease of more than Rs 229,458 in the prices of cars in 2000cc and above category
  • Localization:
    • The condition of 30% value addition has been introduced on imported raw materials and components to be used for the manufacturing of vehicles in the country.
    • To ensure rapid localization, the government shall update the localized manufacturing of auto parts every six months.
  • “Own Money” Mitigation Measures:
    • Rs. 50,000 to Rs. 200,000 tax whereby the first registration is not in the name of the person who booked the vehicle.
    • Compulsory payment of KIBOR+3% mark up by manufacturers on delivery beyond 60 days.
    • Maximum upfront payment on booking not to exceed 20 percent of the invoice value at the time of booking.
    • Real-time trackable online booking and manufacturing status.
  • Safety Measures in Cars:
    • In order to improve and ensure road safety, basic safety measures such as brakes, steering, tires, lights, safety belts, airbags, and collision safety will be met.
    • 17 such shortlisted regulations will be implemented in a phased manner over a period of the next three years.
  • Exports:
    • Exports targets for the manufacturers will be up to 10 percent of the import value by the end of five years of this proposed policy.

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  • Electric Vehicles:
    • A higher number of EVs in the local market would encourage auto companies to invest in the relevant infrastructure in Pakistan to facilitate EVs. To that interest, the following incentives have been provided to the said vehicle segment:
      • Customs Duty (CD) on Specific Parts for electric vehicles to attract 1 %
      • 10% CD on import of CBUs of EVs

The exact details of several additional incentives are yet to be revealed by the government, however, it has been highlighted that the new prices of the vehicles shall become effective within the next two days. However, the additional details do suggest that the new auto policy is shaping up to be a strong one for the Pakistani market.

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