Pakistan's government said on Thursday that French carmaker Renault is planning to invest in a local assembly plant with first production due to start by 2018.
Finance Minister Ishaq Dar met with Renault executives in France in September as part of a wider efforts to attract more foreign players to its automobile sector, a statement from Prime Minister Nawaz Sharif's office said.
"As a result of the Finance Minister's efforts and persuasion, Renault has decided to invest in Pakistan," the statement said.
"They will start assembling cars in Pakistan by 2018."
A Renault spokesman in Paris confirmed the plans, saying the company "has entered into exclusive negotiations with Ghandhara and Al Futtaim Groups to develop the Renault brand in Pakistan, including a manufacturing plant on the Ghandara site in Karachi".
Neither side gave a figure for the planned investment.
Pakistan has been seeking to attract several foreign car makers with generous offers on import duties, but has faced challenges given fears about the country's long-term political stability and security given attacks by the Taliban and other militants.
Aside from Renault, Dar and other Pakistani officials have met with executives from Volkswagen, PSA Peugeot , Fiat and Nissan.
The country wants to shake up its Japanese-dominated car market and loosen the grip of Toyota, Honda and Suzuki, whose locally assembled cars are sold at relatively high prices but lag behind imported vehicles in terms of quality and specifications.
Pakistan has a potential market of nearly 200 million people, but just 180,000 cars were sold in the 2014/2015 fiscal year. That compares with more than 2 million passenger vehicles a year in neighbouring India.
Officials have been touting a new car industry policy, skewed in favour of new entrants, that includes offering foreign car manufacturers lower duties as an incentive to set up plants in Pakistan or re-open old sites.
The incentives have angered existing market players, some of whom have said publicly they should get similar terms.