Pakistan’s new auto policy: Will cars get cheaper? EV tax cuts, Rs10m loans explained

Dubai: Pakistan has unveiled an ambitious new automobile policy promising cheaper cars, major tax concessions for electric vehicles and significantly higher financing limits, in a move aimed at making vehicle ownership more affordable for millions of consumers.

The proposed Auto Policy 2026–31 also seeks to boost domestic manufacturing, improve vehicle safety and transform Pakistan into an automobile exporter, with a target of $6 billion in overseas sales over five years.

Information Minister Attaullah Tarar and Prime Minister’s Adviser on Industries and Production Haroon Akhtar Khan announced the measures at a press conference in Islamabad on Saturday, Dawn reported.

However, the policy has not yet completed the formal approval process, while several proposed tax concessions require clearance from the International Monetary Fund (IMF).

The government says vehicle prices will decline gradually as import duties on fully built cars, assembly kits and automotive components are reduced over the next five years.

Akhtar said Prime Minister Shehbaz Sharif had specifically instructed officials to make cars more affordable, particularly for middle- and lower-middle-income families.

The government expects lower manufacturing costs and increased competition to bring down prices across most vehicle categories, excluding luxury cars.

However, officials did not announce specific price reductions or dates when consumers could expect to see cheaper vehicles in showrooms.

Earlier industry estimates suggested some petrol vehicles could become 8–10 per cent cheaper, while certain plug-in hybrids could see reductions exceeding 20 per cent, Dawn reported in October, citing Topline Securities.

Those figures remain projections rather than confirmed price cuts.

One of the biggest changes involves a new tax structure designed to encourage electric vehicle ownership.

Under the proposal, sales tax would be set at:

The government also plans to exempt electric vehicles priced up to $50,000 from capital value tax, withholding tax and federal excise duty.

More expensive EVs would be treated as luxury vehicles and taxed at normal rates.

However, Akhtar acknowledged that the proposed sales tax concessions remain subject to IMF approval.

Automotive website PakWheels also reported that the measures should not be treated as implemented until the required government, regulatory and legislative approvals are completed.

The government is proposing a major expansion of vehicle financing to make electric cars more accessible.

Under the plan, the maximum financing limit for EVs would increase from Rs3 million to Rs10 million, while the repayment period would be extended from three years to five years.

The change could allow more buyers to finance higher-priced electric vehicles through longer repayment arrangements.

However, the revised limits will require the necessary regulatory changes before banks can offer them.

The proposed policy also seeks to address the controversial practice of charging additional premiums, commonly known as on-money, for vehicle deliveries.

Manufacturers would be prohibited from demanding more than 20 per cent of a vehicle’s price as an advance payment when accepting bookings.

Officials said the measure was intended to improve transparency and protect consumers from unfair practices.

Pakistan also plans to encourage investment in charging infrastructure, one of the major obstacles to wider electric vehicle adoption.

Under the proposed incentives, sales tax on charging equipment would be reduced to 1 per cent, while customs duty would be removed.

The government also intends to provide financial support to help charging station operators overcome the initial lack of demand.

Officials say this would help address the problem of consumers hesitating to buy EVs because charging facilities are limited, while businesses remain reluctant to invest without enough electric vehicles on the roads.

To finance the incentives, the government proposes an automotive development levy on conventional petrol and diesel vehicles with engine capacities above 1,000cc.

Vehicles with engines of 1,000cc or less would remain exempt, protecting buyers who rely on smaller, more affordable cars.

Revenue from the levy would help fund EV incentives, export rebates and research and development.

The government says the arrangement is intended to avoid adding to the country’s fiscal burden under its IMF programme.

The policy also seeks to reduce the industry’s dependence on imported components and encourage local manufacturing.

Automakers would face mandatory localisation and export targets, with financial rewards for meeting them and penalties for failing to comply.

Exporters could qualify for a 5 per cent duty drawback, with an additional incentive linked to growth in overseas sales.

The government also proposes 45 additional vehicle safety standards aligned with United Nations regulations.

Pakistan aims for electric vehicles to account for 30 per cent of new vehicle sales by 2030.

According to officials, sales of electric two-wheelers have already increased from 60,000 in the 2024–25 financial year to 240,000 in 2025–26.

Despite the announcement, consumers should not expect immediate reductions in showroom prices or automatic access to the proposed tax concessions and financing arrangements.

PakWheels reported that the policy still requires formal approvals, including agreement with the IMF on key fiscal measures.

The government has outlined its plans, but final implementation dates, tax notifications and financing rules remain to be confirmed.

For Pakistani car buyers, the central question is now how quickly the promised savings translate into actual showroom prices.