Expert Take: No Cheap Cars? What Budget 2026 Means for Buyers

An Inside Look into Pakistan’s Impending Budget Dilemma

If you’ve been scrolling through social media or flipping through news channels lately, you might have seen flashing headlines promising “great news for car buyers” ahead of the upcoming fiscal budget. Flashy TV Headlines hint at tax relief and cheaper wheels. However, examining the actual policy drafts circulating reveals a much less optimistic picture.

In a recent, highly eye-opening PakWheels podcast, host Sunil Munj sat down with economic and auto-industry analyst Dr. Ali Khizar to break down the upcoming New Energy Vehicle (NEV) and federal budget policies.

Their verdict? Brace yourselves. No car is getting cheaper; in fact, most are about to get significantly more expensive.

Here is a comprehensive breakdown of what is actually happening behind closed doors, why the auto industry is trapped in a “cat-and-mouse” game, and what it means for your wallet.

The Illusion of the “Cheap” Suzuki Alto

Let’s address the single shred of seemingly good news first. There is a rumor that the General Sales Tax (GST) on cars with engine capacities under 800 cc (essentially just the Suzuki Alto and Suzuki Every in Pakistan) might be slashed from 18% to 12.5%.

On paper, this would reverse last year’s decision, which raised the Alto’s price by roughly 200,000 PKR while, oddly, keeping luxury Lexus imports relatively comfortable. Dr. Khizar refers to this erratic policy shifting as a botched “Robin Hood economy.”

However, even this minor relief comes with a massive catch: The International Monetary Fund (IMF).

“The IMF’s stance is crystal clear: eliminate all GST concessions across the board. Everyone needs to be equalized at 18%.” — Dr. Ali Khizar

If the government yields to IMF pressure to secure its next bailout package, even the budget-friendly Alto won’t escape the tax net.

The “Cat Fight” Over the NEV Policy

Right now, Pakistan’s auto sector is experiencing a severe contraction. Over the last ten months, local manufacturers sold roughly 211,000 units. While that may reach 260,000 by the end of the fiscal year, it is a far cry from previous market peaks of over 300,000 units. The government’s stated goal is to scale local production to 500,000 cars, but instead of expanding the market, automakers are viciously fighting over shrinking slices of the existing pie.

Because different companies have invested in different technologies, every brand is lobbying a different ministry to manipulate the upcoming policy to favor their specific lineup:

• The Plug-in Hybrid (PHEV) Camp wants massive breaks for hybrid tech.
• The Battery Electric Vehicle (BEV) Camp wants pure-electric cars to have a monopoly on green incentives.
• The Range-Extended Electric Vehicle (REEV) Camp is pushing for its unique tech to be classified alongside pure EVs.
• Used Car Importers are bypassing ministries entirely, reportedly writing letters to the Chief of Army Staff (COAS) begging for import restrictions to be lifted to ease the market.

The Reality Check: Anticipated Price Hikes

Despite the optimism surrounding the initial drafts of the NEV policy shared back in May, the IMF has reportedly rejected aggressive tax holidays. The current simulations presented to the Prime Minister indicate a massive shift toward equalizing taxes.

If the government standardizes the GST across all advanced drivetrains to around 9%, the current privileges enjoyed by certain segments will break down.

Here is how the projected policy changes could impact estimated market prices:

Vehicle Segment / Model	Current Tax Structure	Projected Tax Structure	Current Estimated Price	Projected Estimated Price
Pure EV / REEV (e.g., Deepal SO5)	1% GST	9% GST	10,000,000 PKR	12,500,000 PKR
Compact EV (e.g., BYD Atto 3)	1% GST	9% GST	9,000,000 PKR	12,000,000 PKR
PHEV (Plug-in Hybrids)	8.5% GST	9% GST	Stabilized / Minor Increase	Stabilized / Minor Increase
Localized Parts Duty	25%	Increased to 41%	Cost absorbed into the final price	Higher manufacturing cost

The Looming “Environmental Levy”

To make matters worse, in addition to existing carbon taxes and petroleum levies that every motorist pays at the pump, policymakers are considering a new Environmental Levy ranging from 5% to 20% on vehicle purchases, based on engine capacity (cc).

• If applied strictly to 3000 cc+ vehicles, luxury SUVs like the Toyota Land Cruiser will skyrocket in price.
• If lowered to 2000cc, family SUVs like the Fortuner get hit.
• If it creeps down to 1500 cc, it begins to tax average middle-class sedans and crossovers.

Ultimately, by July 1st, almost every car on the market is expected to cost more.

Cars Are a Necessity, Not a Luxury

A systemic flaw in the mindset of Pakistani regulators, from the State Bank to the Ministry of Finance, is the stubborn classification of passenger cars as “luxury items.”

Cars are an essential utility for the middle class and a massive engine for industrial development. The automotive sector is the second-largest taxpayer in Pakistan, right behind the oil industry.

When looking at the numbers, the argument that car manufacturing destroys foreign exchange reserves through completely imported kits (CKDs) holds less water than in other sectors. For instance, Pakistan’s annual import bill for edible oil (crude cooking oil) is significantly higher than the entire import bill for the automotive sector. Yet, the auto industry is routinely singled out as the economy’s villain.

The Real Fix: A Consistent Auto Policy for 10 to 15 Years

The absolute core of the discussion between Suneel and Dr. Khizar centered on one fundamental truth: the timeline of Pakistani policymaking is broken.

Right now, the entire industry operates on a chaotic 6-month cycle. From April to June, the market goes into paralysis because “the budget is coming.” From October to December, buyers freeze up because “the model year is changing.” That leaves local assemblers and parts vendors with barely 6 months of actual, stable business a year.

As prominent industry voices like Ali Jamali (CEO of Indus Motor Company) and academic experts like Dr. Faisal Bari have consistently pointed out, “No policy is a bad policy; an inconsistent policy is a bad policy.“

When Pakistan maintained a relatively stable auto framework from 2016 to 2021, the country reaped massive benefits despite critics questioning its limits:

• The market expanded from 3 legacy manufacturers to 13 active players, breaking up decades-old monopolies.
• Consumers finally got modern features like Level 2 ADAS, airbags, and standard seat belts, which were previously absent from locally made cars.
• The infamous “Own-Money” (premiums for instant delivery) disappeared, giving way to consumer discounts.

If the government flips the tax code every June, global giants like BYD (who are currently trying to set up local manufacturing plants) will lose confidence and pull out. A company cannot map out a 10-year localization strategy if the tax rate swings by 10% every time the country enters a new IMF program.

You can view the complete podcast here:

Final Thoughts

While we all hope the dark clouds over the auto industry clear up, and as Sunil Munj put it, “I would be the happiest person to be proven wrong if cars get cheaper,” the data tells us to prepare for a steep climb in prices

If you are currently sitting on a booked vehicle or delaying a purchase hoping for a massive post-budget drop, you might want to reconsider before the new fiscal regulations roll out on July 1st.

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