Government unveils auto policy focused on affordable cars and EVs

“The government has announced a new auto policy that proposes lower duties, mandatory localisation targets, safety standards and incentives for electric vehicles.”

— Editorial Team

Key points

The government has announced a new auto policy that proposes lower duties, mandatory localisation targets, safety standards and incentives for electric vehicles.
Several EV tax and financing measures remain subject to required approvals.

Business|By Editorial Team|Published 5 hours ago

The federal government has announced a new automobile policy centred on lowering vehicle costs, expanding electric mobility, strengthening local manufacturing and encouraging exports.

Information Minister Attaullah Tarar and Adviser to the Prime Minister for Industries and Production Haroon Akhtar Khan presented the policy in Islamabad. Akhtar said the framework was built around six areas: affordable vehicles, exports, localisation, safety, electric vehicles and transparency.

The government plans to reduce duties on completely built units, assembly plants and components over several years. According to the announcement, the objective is to lower manufacturing costs and gradually make non-luxury vehicles more affordable. The policy process still includes cabinet approval.

Localisation targets will be compulsory for manufacturers. The government also plans a rewards-and-penalties system tied to export performance, under which eligible exporters could receive duty drawback support on local taxes and levies. Manufacturers that fail to meet both export and local-production targets would not qualify for the relevant incentives.

Vehicle safety is another stated pillar of the policy. The government says it has included 45 additional standards aligned with the United Nations WP.29 framework. Officials presented the standards as part of an effort to improve the quality and safety of vehicles made or sold in Pakistan.

For electric vehicles, the plan proposes separate sales-tax rates of 1 per cent for fully electric vehicles, 6 per cent for range-extended electric vehicles and 9 per cent for hybrid electric vehicles. Officials said these measures remain subject to approval by the International Monetary Fund.

Electric vehicles priced up to $50,000 are proposed to receive exemptions from capital value tax, withholding tax and federal excise duty. Vehicles above that threshold would be treated as luxury items. The State Bank's financing ceiling for EVs is also planned to rise from Rs3 million to Rs10 million, while the financing term would extend from three years to five years.

The policy also includes incentives for charging infrastructure, including a proposed 1 per cent sales tax on charging equipment and removal of customs duty. The government says it intends to support charging stations while demand develops and aims to increase the share of electric vehicles among new vehicle sales.