KARACHI/LAHORE: The federal government has extended a broad range of tax and customs-duty incentives for electric vehicles (EVs) in Budget 2026-27, reinforcing its push for cleaner transport, lower fuel imports and domestic manufacturing.
Industry experts, however, have urged policymakers to provide longer-term policy certainty, strengthen charging infrastructure and invest in research and development to accelerate the sector’s growth.
The incentives cover electric passenger and commercial vehicles, manufacturing equipment and charging infrastructure, underscoring the government’s commitment to electrification, energy security and environmental sustainability.
Under the budget, customs-duty exemptions on CKD kits imported by local manufacturers of electric buses, trucks, motorcycles, rickshaws, loaders and prime movers have been extended until June 30, 2027. Tax concessions have also been retained for small electric cars and SUVs with battery capacities of up to 50 kWh and light commercial EVs with batteries of up to 150 kWh, while these vehicles will continue to enjoy a reduced sales tax rate of 1 per cent.
The government has also maintained customs-duty exemptions on EV-specific plant and machinery used for new and expanding assembly facilities, while imported electric cars with battery capacities of up to 50 kWh will continue to attract a concessional sales tax rate of 12.5 per cent.
A new federal excise duty (FED) regime has been introduced for imported EVs purchased for personal use. Vehicles valued at up to Rs20 million will remain exempt, while those priced between Rs20 million and Rs30 million will face a 30 per cent FED. Vehicles worth more than Rs30 million will be subject to a 40 per cent duty.
The exemption from FED on electric four-wheelers has also been extended until June 2027, preserving a significant tax advantage over conventional vehicles.The budget offers no major new incentives for petrol- and diesel-powered vehicles, signalling a gradual shift in industrial policy towards electric mobility. It also points to reduced support for hybrid vehicles, as concessional sales tax rates on locally manufactured hybrids are due to expire on June 30, 2026.
The budget’s implications for the EV industry were discussed during a webinar organised by Indus Consortium titled ‘Budget 2026-27: What It Means for Pakistan’s EV Future’, where experts broadly welcomed the incentives but expressed concern over the short-term nature of the policy framework.
Yasir Hussain, director of the Climate Action Centre (CAC), said concerns over higher taxes on new energy vehicles had not materialised, as the government left NEVP-related taxes unchanged. He noted, however, that taxes on luxury vehicles worth more than Rs20 million had increased.
Hussain said subsidies for electric two- and three-wheelers would continue and revealed that two battery manufacturing plants were under development in Karachi, signalling growing local investment in the sector.
Dr Aazir Khan, director of the Integrated Engineering Centre of Excellence at the University of Lahore, described the federal budget as a stabilisation budget and said EV subsidies remained limited despite higher grants and development spending. He urged the government to extend incentives beyond the current one-year timeframe and invest in electricity grid upgrades to support rising EV adoption.
He also noted that the budget reflected a stronger emphasis on localisation, with customs duties on completely built units (CBUs) remaining in place.Saif Muhammad Shah, senior research associate at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), said the one-year incentive framework could create uncertainty for investors and recommended extending the policy horizon to three to five years.
He said the industry was awaiting a new automotive policy, expected within the next few months, and called for greater investment in EV research and development to improve the speed, range and performance of electric bikes.
Shah also stressed the need for wider charging infrastructure and a dedicated policy for heavy-duty vehicles, which account for a significant share of transport-related emissions.
Following the budget announcement, the Auto Industry Development and Export Policy (AIDEP) sub-committee reviewed future incentives for the sector. While some industry representatives advocated continued support for plug-in hybrid electric vehicles (PHEVs), officials stressed that future incentives should be tied to localisation, technology transfer, employment generation and export growth.
Industry stakeholders have also urged the government to maintain a stable duty differential between Completely Built Units (CBUs) and Completely Knocked Down (CKD) imports to protect local assembly operations and encourage long-term investment.
With tax relief extended across much of the EV value chain, Budget 2026-27 represents one of the government’s strongest endorsements yet of electric mobility. Experts say the next challenge will be ensuring policy continuity, infrastructure development and local innovation to turn incentives into a sustainable EV ecosystem.
