How Budget 2025-26 Affects Pakistan’s Auto Industry

Jawad

28 Jun 2025

112

How Budget 2025-26 Affects Pakistan’s Auto Industry

On June 10, 2025, Finance Minister Mohammad Aurangzeb unveiled the Budget 2025-26 in the National Assembly, introducing sweeping changes that significantly affect the auto sector. These reforms, driven by goals of revenue enhancement, environmental responsibility, and reduced fuel dependency, have direct implications for manufacturers, importers, and vehicle buyers across Pakistan.

This update, often referred to as the Pakistan Auto Budget, marks a turning point in how automobiles are taxed and regulated in the country. From changes in Vehicle Tax 2025 to the introduction of a climate levy, the new policies are reshaping the automobile budget 2025 landscape.

Climate Support Levy: A Green Push

A major highlight of the Budget Auto Policy is the newly imposed Climate Support Levy. Designed to reduce emissions and encourage the adoption of electric vehicles, this tax targets internal combustion engine (ICE) and hybrid vehicles. Both locally assembled and imported units fall under its scope:

1% for vehicles up to 1300cc
2% for vehicles between 1301cc and 1800cc
3% for vehicles above 1800cc

Notably, Electric Vehicles (EVs) and Plug-in Hybrid Electric Vehicles (PHEVs) are exempt. The government’s dual intent with this move is to generate income and support its clean energy vision — a strategic shift in the Auto Sector Budget.

GST Increase on Budget 2025 Cars

Another critical change is the rise in General Sales Tax (GST) from 12.5% to 18% for cars with engine capacities up to 850cc. This directly impacts the prices of popular models such as the Suzuki Alto and Suzuki Every — both among the most accessible new vehicles in Pakistan.

These changes significantly influence Pakistan Car Prices, especially for low-budget consumers. This policy not only reflects a revenue-maximization approach but also narrows the affordability window for entry-level cars.

Fuel Price Impact: Carbon Levy Introduced

Under the umbrella of environmental reform, the budget also proposes a Carbon Levy of Rs. 2.5 per liter on petrol, high-speed diesel (HSD), and furnace oil. Scheduled to be implemented gradually throughout FY 2025-26, this levy is expected to drive up fuel prices and operational costs for vehicle owners.

The measure aligns with Pakistan’s effort to reduce carbon emissions and promote energy efficiency — a key element in the broader auto industry impact of this fiscal plan.

Reforms in Import Duties: RD, CD & ACD

Importers received a mix of relief and strategy change with the budget’s modification of import duties:

Regulatory Duty (RD): Reduced from a maximum of 90% to 50%, eliminated on 554 tariff lines, and lowered on 559 others
Additional Customs Duty (ACD): Reduced on numerous tariff items
Long-Term Plan: Gradual removal of RD and ACD by 2030

These changes in the Budget 2025 Auto framework may reduce costs for imported cars and spare parts. However, they also pose challenges to the local manufacturing sector, which has traditionally been shielded by high import taxes.

Toward a New Auto Policy Era

The Budget 2025 Vehicles agenda points to a paradigm shift in Pakistan’s auto sector. While consumers may initially feel the burden of higher vehicle prices and fuel costs, the long-term goals are clear: a cleaner environment, reduced reliance on fossil fuels, and a modernized transportation system.

Whether you're a buyer, dealer, or manufacturer, understanding this year’s Auto Sector Budget is essential to navigate the evolving landscape of the Pakistan Auto Budget.

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