ISLAMABAD, November 4, 2026: Pakistan’s new energy vehicle (NEV) industry has urged Prime Minister Shehbaz Sharif to expedite implementation of the Auto Policy 2026–31, warning that prolonged delays are disrupting vehicle production, increasing costs and putting investment and employment at risk.
In a public appeal, industry representatives said the government had already lost four months without formally notifying the policy and issuing the necessary Statutory Regulatory Orders (SROs), leaving manufacturers and investors uncertain about future tax and import regulations.
The industry said delays had affected shipments of completely knocked-down (CKD) vehicle kits, interrupted production schedules and increased demurrage charges on imported components.
Manufacturers also reported weakening consumer demand as prospective buyers awaited clarity on vehicle prices under the proposed tax structure.
The industry warned that continued uncertainty could jeopardise billions of rupees in investment and thousands of jobs linked to Pakistan’s emerging electric and hybrid vehicle market.
It also argued that wider adoption of new energy vehicles could help reduce Pakistan’s annual petroleum import bill, which it estimated at approximately $16 billion.
The proposed Auto Policy 2026–31 introduces differentiated sales tax rates for electric, hybrid and conventional vehicles, potentially affecting retail prices and investment decisions across the automotive sector.
Under the draft, battery electric vehicles (BEVs) would attract a 1% sales tax, compared with 6% for range-extended electric vehicles (REEVs), 9% for plug-in hybrid electric vehicles (PHEVs) and 18% for conventional internal combustion engine (ICE) vehicles.
Proposed sales tax under Auto Policy 2026–31
| Vehicle category | Proposed sales tax |
|---|---|
| Battery electric vehicles (BEVs) | 1% |
| Range-extended electric vehicles (REEVs) | 6% |
| Plug-in hybrid electric vehicles (PHEVs) | 9% |
| Conventional petrol and diesel vehicles | 18% |
The draft also proposes an Automotive Development Levy on conventional vehicles, with rates linked to engine capacity.
Cars with engines up to 1,000cc would be exempt, while vehicles between 1,001cc and 2,000cc would face a 2% levy. Vehicles above 2,000cc would attract a proposed 10% levy.
Additional incentives include a 5% import tariff for the first two years on qualifying small electric vehicles valued below $15,000, alongside a 1% tariff on EV-specific, non-localised CKD components.
However, none of these proposed tax changes has taken effect.
The policy remains pending despite earlier government discussions and in-principle support.
Officials from the Ministry of Industries and Production informed the Senate Standing Committee on Industries and Production that the draft would be forwarded to the Finance Ministry before being submitted to the International Monetary Fund (IMF) for review.
Industry representatives said uncertainty over the final tax structure was affecting production planning, vehicle pricing, localisation strategies and decisions on future investment.
They called for the remaining approval process to be completed promptly, arguing that a predictable regulatory framework was essential for expanding local manufacturing and encouraging the adoption of electric and hybrid vehicles in Pakistan.