ISLAMABAD: The federal government has shelved the proposed EV Policy 2026–31 after sustained pressure from local automakers and auto-parts manufacturers, who argued that the draft heavily favoured electric vehicles without adequately protecting Pakistan’s domestic automotive industry.
The decision comes as consumers are already feeling the financial impact of policy uncertainty, with prices of locally assembled hybrid vehicles rising sharply after the expiry of tax concessions under the previous auto policy.
Following Prime Minister Shehbaz Sharif’s intervention, the government withdrew the draft policy and constituted a high-level committee headed by Deputy Prime Minister Ishaq Dar to prepare a revised framework that balances electric vehicle adoption with the interests of local manufacturers, industry stakeholders and consumers.
Industry Pushback Forces Policy Rethink
The proposed EV Policy 2026–31 was drafted by the Ministry of Industries and Production to accelerate the adoption of electric vehicles and reduce Pakistan’s dependence on imported petroleum products.
However, local original equipment manufacturers (OEMs) and the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) opposed the proposal, arguing that it created an uneven playing field by offering generous incentives for fully electric vehicles without imposing sufficient localisation requirements.
Industry representatives warned that broad EV concessions could encourage imports of completely knocked-down (CKD) electric vehicle kits while undermining billions of rupees already invested in Pakistan’s local auto-parts industry and putting thousands of manufacturing jobs at risk.
They called on the government to link EV incentives with annual localisation targets, support existing vendors in transitioning to EV component manufacturing, and adopt a phased roadmap allowing manufacturers to gradually shift from internal combustion engine and hybrid vehicles to fully electric production.
Expiry of Tax Concession Pushes Hybrid Prices Higher
The policy delay has had immediate consequences for consumers.
The Auto Industry Development and Export Policy (AIDEP) 2021–26 expired on June 30, 2026, and no replacement policy was announced before its expiry.
As a result, the concessionary 8.5% General Sales Tax on locally assembled Hybrid Electric Vehicles (HEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) automatically reverted to the standard 25% GST.
The higher tax burden prompted major automakers, including Indus Motor Company and Honda Atlas, to increase prices of several hybrid models by Rs1.3 million to Rs1.5 million, significantly raising costs for prospective buyers.
Hybrid Vehicle Tax Structure
| Vehicle Category | Current GST | Previous GST | Industry’s Proposed Interim Rate |
|---|---|---|---|
| Hybrid & Plug-in Hybrid Vehicles | 25% | 8.5% | 18% |
| Petrol & Diesel Vehicles | 25% | 25% | 25% |
What Happens Next?
The committee headed by Ishaq Dar will prepare a revised EV Policy that seeks to strike a balance between promoting electric mobility, protecting local manufacturing and maintaining investment in Pakistan’s automotive sector.
Industry stakeholders are also urging the government to introduce an interim 18% GST on hybrid vehicles until the revised policy is finalised.
Until a new policy is approved, uncertainty over tax rates, localisation requirements and future EV incentives is expected to continue, while consumers and manufacturers await clarity on Pakistan’s long-term automotive roadmap.
Also Read: Pakistan Targets 2.2 Million Electric Vehicles by 2030 as Government Allocates Rs9 Billion Subsidy
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