Government Revises Auto Policy After Industry Concerns Over EV Plan

The federal government has decided to revive its proposed Auto Policy 2026-31 after concerns raised by local automobile manufacturers. The move comes after major carmakers urged the government to review the draft policy, arguing that some of its proposed measures could negatively affect the existing auto industry.

According to sources, the Ministry of Industries and Production had prepared the new auto policy after consulting different stakeholders. A key objective of the policy was to encourage the adoption of electric vehicles (EVs) and reduce Pakistan’s dependence on imported petroleum products. As the country imports nearly 80% of its petroleum needs, promoting EVs was seen as a long-term strategy to lower fuel imports and support cleaner transportation.

However, the proposed policy reportedly caused concern among conventional car manufacturers. Industry representatives believed that some of the proposed incentives heavily favored electric vehicles without providing a practical transition plan for companies that currently produce petrol, diesel, and hybrid vehicles. They raised their concerns with Prime Minister Shehbaz Sharif, who later directed to review the draft policy.

Government Revises Auto Policy After Industry Concerns Over EV Plan

As a result, the government has shelved the initial draft and formed a new committee to prepare a revised version. Deputy Prime Minister Ishaq Dar has reportedly been assigned the responsibility of overseeing the preparation of the new policy.

The delay in approving the new auto policy has also created tax-related issues for the automotive sector. The previous Auto Industry Development and Export Policy 2021-26 expired on June 30, 2026. Since the new policy was not announced before the deadline, tax concessions available under the previous policy also expired automatically.

One of the biggest impacts has been on hybrid electric vehicles (HEVs) and plug-in hybrid vehicles. Under the previous policy, these vehicles enjoyed a reduced General Sales Tax (GST) rate of 8.5%. From July 1, 2026, the GST reverted to the standard 25% after the concession lapsed.

The higher tax has significantly increased vehicle prices. Some hybrid models have become more than Rs1.3 million more expensive, prompting major manufacturers, including Toyota and Honda, to revise their prices. In some cases, companies also suspended vehicle bookings and deliveries due to uncertainty over the tax structure.

The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has also expressed concern over the delay. The association has urged the government to adopt a balanced tax policy while Pakistan continues its transition toward electric mobility. It has proposed reducing GST on hybrid vehicles to 18% until the country’s EV charging infrastructure and local parts industry become more developed.

PAAPAM has clarified that it supports the shift toward electric vehicles but believes the transition should happen gradually. The association argues that government incentives should encourage local manufacturing instead of increasing dependence on imported EV kits. It has recommended linking EV incentives with higher levels of local production each year.

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Industry representatives have also called for greater investment in the local production of batteries, electric motors, and electronic components. They believe existing parts manufacturers should receive financial and technical support to upgrade their factories and prepare for EV production. They have also stressed the importance of technology transfer so that Pakistani companies can develop local expertise instead of relying on imports.

The association has warned that without a clear transition plan, existing investments and jobs in Pakistan’s auto parts sector could be at risk. It believes the new auto policy should provide equal opportunities for both established manufacturers and new EV entrants while protecting local industry.

The government will likely prepare a revised auto policy that balances the promotion of electric vehicles with the interests of Pakistan’s existing automotive industry. Industry stakeholders hope the updated policy will support cleaner transportation while ensuring sustainable growth, local manufacturing, and employment in the sector.