ISLAMABAD: The federal government on Saturday unveiled a new automotive policy aimed at reducing car prices, promoting electric vehicles (EVs) and increasing auto exports from around $200 million to $6 billion over the next five years.
Information Minister Attaullah Tarar and Adviser to the Prime Minister on Industries and Production Haroon Akhtar Khan announced the policy at a press conference in Islamabad, outlining six key pillars: affordable vehicles, higher exports, increased localisation, improved safety standards, promotion of electric vehicles and transparency in the automotive sector.
Haroon Akhtar said vehicle prices, except those of luxury models, would gradually decline as the government reduces duties on completely built-up units (CBUs), components and raw materials over five years.
“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,” he said.
The policy sets a target of increasing Pakistan’s automotive exports from the current level of around $200 million to $6 billion within five years. Manufacturers achieving their export targets will receive a 5 per cent drawback on local taxes and levies, along with an additional 10 per cent incentive on incremental exports.
However, companies failing to meet both export and localisation targets will face penalties and lose the available rebates.
Localisation, safety standards and EV incentives
The government has made localisation mandatory under the new policy, setting specific targets for manufacturers. It has also introduced 45 additional vehicle safety standards in line with the United Nations WP.29 regulations.
To encourage electric vehicle adoption, the government has proposed reduced sales tax rates of 1 per cent for fully electric vehicles, 6 per cent for range-extended electric vehicles and 9 per cent for hybrid vehicles, subject to approval from the International Monetary Fund (IMF).
Electric vehicles priced up to $50,000 will also be exempt from capital value tax, withholding tax and federal excise duty under the proposed measures.
The State Bank of Pakistan’s financing limit for electric vehicles has been increased from Rs3 million to Rs10 million, while the repayment period has been extended from three to five years. The policy also provides customs duty relief for electric vehicle charging stations.
Tarar said the measures would help reduce Pakistan’s petroleum import bill and carbon emissions, create employment opportunities and support the development of the country’s vehicle export industry.
He added that petrol-powered vehicles with engine capacities below 1,000cc would remain outside the major changes introduced under the policy.
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The government has also proposed a restriction on advance payments, barring automakers from collecting more than 20 per cent of a vehicle’s price at the time of booking.
The policy was finalised after extensive consultations with stakeholders. Its final draft has been approved by the prime minister and will now be presented to the federal cabinet for formal approval. Some of the proposed tax measures remain subject to IMF concurrence.
