Pakistan Auto Policy Faces Four-Month Delay, Pending IMF Review

Pakistan’s Auto Policy 2026–31 has remained unimplemented for four months, while the latest draft proposes sales taxes of 1% for battery electric vehicles, 6% for range-extended electric vehicles and 9% for plug-in hybrids. The industry has asked Prime Minister Shehbaz Sharif to notify and implement the policy immediately, warning that continued delays threaten production, investment and employment.

In a public appeal, the new energy vehicle (NEV) industry said: “Continued delays are creating uncertainty for manufacturers and investors.” The industry said four months have already been lost through delays in notification and issuance of the required special regulatory orders (SROs).

What has the delay already disrupted?

The industry said uncertainty has disrupted shipments of completely knocked-down (CKD) kits and production. It also reported higher demurrage (fees for holding imported goods beyond agreed deadlines) and weaker consumer demand.

The appeal warned that further delays could put billions of rupees in investment and thousands of jobs at risk. It cited an estimated $16 billion annual petroleum import bill, arguing that faster NEV adoption could reduce the country’s import burden.

The appeal gave no rupee amount or job count and named no vehicle makers, plant locations, production volumes or capacity plans. Its language is therefore a warning about potential exposure, not a plant-by-plant output forecast.

What taxes does the draft propose?

The draft separates sales tax by vehicle technology. The proposed rates are not in effect:

• Battery electric vehicles (BEVs): 1%.
• Range-extended electric vehicles (REEVs): 6%.
• Plug-in hybrid electric vehicles (PHEVs): 9%.
• Internal-combustion-engine (ICE) vehicles: 18%.

Conventional cars would also face a proposed Automotive Development Levy, structured by engine capacity. Vehicles up to 1,000 cc (cubic centimeters) would pay no levy, those from 1,001 cc to 2,000 cc would face 2%, and vehicles above 2,000 cc 10%.

The draft offers lower import duties for certain electric vehicles (EVs) and components. It proposes a 5% tariff for the first two years on small EV imports valued below $15,000 and a 1% tariff on EV-specific CKD parts that have not been localized (not produced domestically).

Where does the policy stand?

After several rounds of discussion and in-principle government backing, the policy remains unfinalized and unimplemented. Ministry of Industries and Production officials told the Senate Standing Committee on Industries and Production that the draft would go to the Finance Ministry, then to the International Monetary Fund (IMF) for review.

What does the delay change for manufacturers and buyers?

The review sequence has no stated completion date in the appeal. For manufacturers, the proposed tax schedule could change vehicle prices, localization plans (efforts to increase domestic production) and investment decisions. Some buyers may postpone purchases while waiting to learn whether the changes take effect.

In its appeal, the industry said: “A clear policy framework is necessary to protect investment, support local manufacturing and accelerate Pakistan’s transition towards electrified vehicles.” The request focuses on completing the review process without further delay.

The industry warned that continued delay could cause lasting damage to Pakistan’s emerging NEV industry. That warning follows the reported disruption to CKD shipments and production, rather than a quantified breakdown of output by plant.

What should be watched next?

The next checkpoints are transmission of the draft to the Finance Ministry, IMF review, final notification and an effective implementation date. For industry planners, the decisive measures are the approved sales-tax and levy rates, the start date for the proposed two-year 5% small-EV tariff, and whether CKD shipments recover after the rules become clear.