The federal government is planning to waive toll taxes on highways and motorways for electric vehicles and plug-in hybrid electric vehicles under the upcoming Auto Industry Development and Export Policy 2026-31. The waiver is intended to encourage electric mobility and clean energy adoption in Pakistan and forms part of a broader package of incentives being prepared under the highly anticipated new auto policy, which is also moving toward a major restructuring of the country’s long-standing protectionist automotive regime. The toll exemption, if implemented, would represent a meaningful reduction in the total cost of ownership for electric and plug-in hybrid vehicle buyers, particularly those who regularly travel between cities on Pakistan’s expanding motorway network.
On the tariff side, Additional Customs Duties will be fully phased out by the fiscal year 2029, while Regulatory Duties will be reduced by 80 percent by fiscal year 2030. All Statutory Regulatory Order-based concessions, which have historically shaped tariff protection in the sector, are also set to be abolished by fiscal year 2030. The policy outlines a gradual reduction in import and assembly tariffs as well, with duties on Completely Built Unit vehicles, currently in the 50 to 100 percent range, brought down to 35 to 75 percent over five years, while Completely Knocked Down unit tariffs used in local assembly of cars, sport utility vehicles, and minivans will decline from 30 percent to 20 percent over the same period.
The policy expands the clean-vehicle definition from narrow electric vehicles to New Energy Vehicles, a category that now officially includes Battery Electric Vehicles, Plug-in Hybrids, Range-Extender Electric Vehicles, and Fuel Cell Vehicles, with the most significant change being the proposed sales tax treatment that levels the playing field for any vehicle with a plug. Plug-in hybrids and Range-Extender Electric Vehicles are proposed to drop to a 1 percent sales tax, down from 8.5 percent, while zero percent customs duty is proposed on charging stations and battery-swapping equipment, and 5 percent on imported Completely Built Unit chargers. Self-charging hybrids, which have dominated Pakistan’s new-car market over the past two years and saw rapid adoption under the previous 8.5 percent sales tax regime, are expected to see their tax adjusted to 9 percent, narrowing the advantage they currently hold over plug-in alternatives.
The draft also includes a push to the State Bank of Pakistan to relax vehicle financing regulations, with proposals to reinstate seven-year installment plans and raise the financing limit to Rs10 million, allowing buyers to finance higher-end new energy vehicles within the formal banking system. For localization, new energy vehicle-specific parts will enjoy a 1 percent customs duty for the first three years from 2026 to 2029, rising to 5 percent in the fourth year, with firm localization targets set for four-wheeler electric vehicles and an 85 percent domestic value addition target for two-wheelers and light vehicle categories by 2030. Taken together, the policy’s combination of toll waivers, sales tax reductions, tariff restructuring, and financing reforms represents the most comprehensive package of electric mobility incentives Pakistan has assembled to date, signalling a decisive shift in the government’s approach from passive encouragement to active market-shaping in favour of electrified transport.
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