Pakistan Unveils New Auto Policy Targeting Affordability and Electric Vehicle Adoption
Government introduces tariff reforms and tax incentives to boost local manufacturing and EV transition.
1Comprehensive Policy Framework
The Pakistani government introduced a new auto policy centered on six pillars, including affordability, export growth, and vehicle safety. Officials Haroon Akhtar Khan and Attaullah Tarar emphasized that the strategy aims to lower production costs for middle-class consumers. The cabinet has initiated the formal approval process to implement these structural changes nationwide.
2Tariff Reductions and Pricing
To lower vehicle prices, the government plans to reduce duties on completely built units and assembly components annually over five years. While luxury vehicles remain excluded from price cuts, the policy mandates increased localization for manufacturers. These measures are designed to decrease the national import bill while fostering a competitive local market.
3Export Incentives and Penalties
Manufacturers now face a strict rewards and penalty system linked to export targets. Companies receive a 5 percent Duty Drawback on Local Taxes and Levies, with an additional 10 percent bonus for exceeding targets. Failure to meet local manufacturing and export quotas will result in penalties, ensuring that industry growth creates domestic jobs.
4Safety Standards Implementation
The policy integrates 45 additional safety standards aligned with the United Nations’ WP.29 code to enhance road safety. Authorities stated that these rigorous requirements will apply to both newly manufactured and used vehicles. By adopting global safety benchmarks, the government aims to elevate the quality of the domestic automotive sector significantly.
5Electric Vehicle Tax Structure
Electric vehicles will benefit from tiered sales taxes: 1 percent for pure EVs, 6 percent for range-extended models, and 9 percent for hybrids. EVs priced under $50,000 are exempt from capital value and withholding taxes. These incentives are currently awaiting final approval from the International Monetary Fund to ensure fiscal stability.
6Financing and Infrastructure Support
The State Bank of Pakistan is expanding car financing limits from Rs3 million to Rs10 million specifically for EVs. Furthermore, the loan tenure has been extended from three to five years. To support charging infrastructure, customs duties on charging equipment have been removed, and sales tax has been reduced to 1 percent.
7Revenue Neutrality Strategy
To maintain fiscal balance under the IMF program, the government will collect revenue from internal combustion engine vehicles exceeding 1,000cc. Vehicles under this threshold, typically used by lower-income groups, remain exempt from changes. Collected funds will be reinvested into export rebates and research and development to sustain the industry's long-term growth.
8Transitioning Toward Sustainability
The government aims to shift 30 percent of new vehicles to electric power by 2030, a target officials believe is achievable ahead of schedule. By reducing reliance on oil imports and promoting greener transportation, the policy seeks to address both economic pressures and environmental concerns for the benefit of all Pakistani citizens.