Prime Minister Shehbaz Sharif has approved the draft Auto Policy 2026-31, which proposes just 1% sales tax on battery electric vehicles and targets $6 billion in auto exports over five years.
The draft will now go to the federal cabinet for in-principle approval, after which it will need parliament’s nod.
Key EV Proposals in Auto Policy 2026-31
- 1% sales tax on battery electric vehicles during 2026-31.
- 6% sales tax on range-extended EVs and 9% on plug-in hybrids.
- 10% federal excise duty on EVs priced above $75,000.
- Lower tariffs on small EVs priced under $15,000.
- Car financing limit raised from Rs3 million to Rs10 million, with repayment extended from three to five years.
Tariff Cuts and Export Targets
The policy aims to open the sector to competition by reducing tariffs on completely built-up units (CBUs) and CKD kits to 15% by 2030-31.
Total exports of vehicles and parts are targeted at $6.01 billion over five years, rising from $256.6 million in 2026-27 to $2.19 billion in 2030-31. Carmakers would face mandatory export targets, earning a 5% incentive on export value plus 10% on growth over the previous year. Companies that miss their targets two years in a row could lose their manufacturing certificates.
New Levy and Testing Institute
An Automotive Development Levy on vehicles above 1,000cc is expected to raise more than Rs232 billion over five years to fund export incentives and technology upgrades for parts makers. A Pakistan Automotive Testing Institute will also be set up to enforce international safety and quality standards.
Parts Makers Raise Concerns
The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has opposed the plan. Its chairman, Abdul Rehman Aizaz, said cutting import tariffs on parts to 15% could wipe out local vendors and turn Pakistan into a market for imported cars.
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