By Urdu Report Editorial Team
Pakistan’s proposed five-year Auto Policy 31-2026 could bring significant relief to electric vehicle buyers through lower taxes, expanded financing and incentives for the new energy vehicle sector.
Prime Minister Shehbaz Sharif has approved the draft policy, but it has not yet been implemented. Final approval is subject to legal review and consultation with the International Monetary Fund (IMF).
Proposed Tax Relief for Electric Vehicles
The draft policy proposes major tax incentives for electric and new energy vehicles. These include reducing sales tax on their parts and raw materials to 1%.
It also recommends removing Federal Excise Duty, Capital Value Tax and withholding tax on these vehicles.
In addition, the proposed customs duty on imported equipment for electric vehicle charging stations would be reduced to 1%.
Vehicle Financing Limit Could Increase
To make electric vehicles more accessible, the government is considering increasing the vehicle financing limit from Rs30 lakh to Rs1 crore.
The proposed repayment period could also be extended to seven years. However, these financing measures will require final approval before they can take effect.
What Could Happen to Petrol and Diesel Car Prices?
The draft policy also includes a plan to gradually reduce customs duties on conventional vehicles.
By the fifth year of the policy, in 2030, customs duty on vehicles could be reduced to 15%, according to the proposal.
However, petrol and diesel vehicles are unlikely to see an immediate or significant price reduction in the early years. Additional Federal Excise Duty and customs charges could limit the impact of the proposed changes.
Experts Predict Lower Electric Vehicle Prices
Automotive industry experts taxes and duties currently account for a substantial share of electric vehicle prices in Pakistan, this burden can reach as high as 156% on some vehicles.
Electric vehicle prices could fall significantly if the tax burden were reduced to around 50%.
Prices of petrol vehicles with engine capacities ranging from 850cc to 1,800cc could also see a modest decline, although the draft does not provide complete clarity on this matter.
When Could the New Auto Policy Take Effect?
Experts agree that fully electric vehicles are likely to receive the largest price-related benefits under the proposed policy because they have been offered the most extensive tax incentives.
However, the expected reduction in the price of any specific model cannot be determined until the tax structure, local production arrangements and company decisions are finalized.
The proposed Rs1 crore financing limit and seven-year repayment period are also subject to final approval.
Although the prime minister has approved the draft, the policy has not yet come into force. The draft has been sent to the Ministry of Law for legal review, while the Ministry of Finance has been directed to consult the IMF.
Final approval is expected after consultations with the IMF in October. Until the government issues an official notification, consumers should not treat any immediate price cuts or new financing facilities as confirmed.
