PM approves five-year auto policy draft with major NEV tax relief, phased tariff cuts

Prime Minister Shehbaz Sharif has approved the draft Automobile Policy 2026-31, according to Profit by Pakistan Today, offering tax relief for new energy vehicles while shielding existing conventional assemblers for another four years. Legal vetting by the Ministry of Law comes next, and the Finance Ministry has been told to take the draft to the IMF. The policy largely follows the National Tariff Policy, with rates applying from this fiscal year.

The prime minister revised several elements, most notably separating battery electric vehicles (BEVs) from range extended (REEVs) and plug-in hybrids (PHEVs), despite a committee proposing equal treatment for all three. BEVs will enjoy the strongest tax advantage, with REEVs and PHEVs next in line. NEVs, their CKD kits, parts and raw materials will attract only 1% sales tax, and the vehicles are free of federal excise duty, capital value tax and withholding tax. Financing support also expands, with the loan cap rising to Rs10 million from Rs3 million and the loan term extended to five years.

Customs duty on cars above 1,801cc stays at 40% through FY2028-29, then falls to 15% by FY2030-31. Prices of ICE models up to 850cc are projected to drop just 5.5% in year one, with an added 4.5% customs duty limiting the fall. The Toyota Fortuner is projected to fall from Rs20.5 million to Rs18.6 million by the final year, a reduction of around 9%.