The federal government on Saturday introduced the new auto policy, with a special focus on cheaper vehicles and electric vehicles (EVs).
Information Minister Attaullah Tarar and Adviser to the Prime Minister for Industries and Production Haroon Akhtar Khan announced the policy while addressing a press conference in Islamabad.
Speaking to the media, Akhtar said that a lot of work was done in drafting the policy, adding that Prime Minister Shehbaz Sharif had invested a lot of time in this regard. He said the process of the cabinet’s approval began today, with Tarar saying they wanted to address the speculations before moving on to the approval.
He said that the policy rested on six basic pillars: cheaper vehicles, especially for the middle class and lower middle class; encouraging exports; localisation; vehicle safety; promotion of EVs; and transparency.
He said that the premier had introduced a tariff policy, the purpose of which was to lower the cost of production and the import bill of raw materials.
“You will see that prices of cars will come down … the manufacturing cost of automakers will come down; these were the prime minister’s specific instructions. The prices of all vehicles, except luxury vehicles, will come down,” Akhtar said.
He explained that prices would come down gradually as the duties for completely built units (CBUs), assembly plants and components would be reduced each year, eventually leading to competitive tariffs after five years.
The PM’s industries aide said localisation had been made mandatory, with targets to be given to manufacturers. He added that a “rewards and penalty” system will also be introduced to boost exports, under which exporters will get 5 per cent Duty Drawback on Local Taxes and Levies (DLTL), with an additional 10pc as exports increase.
“But if you do not achieve the targets, a penalty will be imposed as well,” he warned, adding that car manufacturers will not get DLTL unless they achieve the entire export target as well as their local manufacturing target.
Akhtar stressed that the government had made the export rebate conditional on the local manufacturing target, noting that PM Shehbaz wanted more jobs to be created in the country through increased plants.
Speaking on vehicle safety, Akhtar said the policy includes 45 additional safety standards in line with the United Nations’ WP.29 code. He contended, “When our vehicles will go through these safety codes, they will be considered the world’s safest vehicles — both manufactured and used.”
The production adviser further said that the government’s aim of transitioning 30pc of all new vehicles in Pakistan to electric power by 2030 was “about to happen sooner than that”.
Explaining a “major benefit” for EVs, he said three categories of sales taxes have been planned — 1pc on purely electric vehicles, 6pc on range-extended (REEVs) and 9pc on hybrid EVs. However, he added this was subject to approval by the International Monetary Fund (IMF).
Akhtar also said no capital value tax (CVT), withholding tax or federal excise duty (FED) would be applicable on EVs that are priced up to $50,000. EVs above this will be considered “luxury” items and will be subject to normal taxation.
Furthermore, the State Bank of Pakistan’s car financing plan, which offers up to Rs3 million for ordinary cars, will be expanded up to Rs10m for all EVs, along with the tenure extended from three years to five years.
Akhtar went on to note that the government will also incentivise setting up charging stations, explaining that this was a key step in the ultimate goal of shifting to pure EVs, with hybrid and REEVs aiding in the transition period.
He said the government will fund the viability gap that currently exists, with the business community facing a lack of demand for charging stations, while consumers needed those stations in order to switch to EVs.
Sales tax on the equipment for charging stations has been reduced to 1pc, while customs duty has been removed.
Akhtar said that due to the government being committed to an IMF programme, it was aiming for “neutral revenue on whatever incentives we are giving”, adding that revenue would be collected from internal combustion engine vehicles above 1,000cc — ordinary cars — rather than EVs, with lower and middle-income groups using cars less than 1,000cc exempted.
He added that the revenue collected will also be used for export rebates and research and development.
Akhtar highlighted that following the launch of the New Energy Vehicle (NEV) Policy 2025-30 last year, the number of electric two-wheelers sold increased to 240,000 in FY25-26 from 60,000 in FY2024-25,
‘Need of the time’
Addressing the press conference, the information minister regretted that under “protectionist policies” in past decades, wherein import duties were increased and local industry was supported, the local industry did not innovate or make value additions.
Tarar noted the increased use of electric motorcycles and scooties, terming it a “need of the time”. He also pointed out the need to prevent or even reduce the increasing import bills for oil, which in turn impacts the public through rising fuel prices.
He emphasised that no changes were made under the policy to ordinary petrol vehicles under 1,000cc, as many common citizens still use those.
In a post on X, Tarar said the new policy was developed after consultations with all stakeholders, analysis of technical data, and a review of various global models.
“Innovation, value addition, and localisation will be promoted in the local industry to create employment opportunities and enable vehicle exports,” he said.
The minister highlighted that encouraging EVs will reduce carbon emissions and the oil import bill, adding that incentives have also been provided for establishing charging stations.
He termed the initiative a “significant step toward providing Pakistani citizens with affordable, high-quality, and environmentally friendly transportation”.
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