Prime Minister Shehbaz Sharif signed off on a five-year automotive strategy that turns down an International Monetary Fund suggestion to increase the sales tax on electric vehicles to 18 percent, while aiming for $6 billion in vehicle exports.
A 10 percent federal excise duty will affect electric vehicles priced over $75,000, according to the policy document, while import tariffs on vehicles will drop step by step to reach 15 percent by 2030-31 to boost sector competitiveness.
Electric vehicle sales taxes will drop progressively through 2031.
Battery electric vehicles face a 1 percent sales tax between 2026 and 2031, whereas range-extended electric vehicles face a 6 percent tax and plug-in hybrids face 9 percent. Smaller electric vehicles priced under $15,000 receive lower tariffs, alongside cuts to general electric vehicle import duties.
Financing caps for electric vehicles will expand from Rs3 million to Rs10 million, and loan repayment timelines will stretch from three years to five. Making small automobiles available to lower-income buyers is another emphasis of the strategy.
Vehicles exceeding 1,000cc will face an automotive development levy projected to bring in more than Rs232 billion across five years, with funds directed toward export bonuses, industrial growth initiatives, and technology upgrades for makers of auto components. The administration will pass legislation regarding this levy by December 2026.
Mandatory export goals apply to vehicle manufacturers under the export framework. Firms will obtain compensation matching 5 percent of their export totals, plus another 10 percent bonus for shipments exceeding the prior year output.
Firms failing to hit quotas will incur fines, and missing quotas for two straight years results in the revocation of a manufacturing certificate. Auto parts shipments should hit $1.2 billion by 2030-31, alongside new domestic manufacturing quotas for components that strip companies of perks if ignored.
A Pakistan Automotive Testing Institute will open, backed by budgets for research, certification, and independent checks. Global safety benchmarks will govern both domestic and imported automobiles, and buyer protection provisions must appear in firm contracts.
Bi-annual audits will ensure sector transparency, and payouts for domestic manufacturing and export perks require independent reviews. The strategy additionally outlines fresh goals for training skilled labor within the industry.
