Key Takeaways
- Pakistan’s draft policy treats all electric vehicles equally, despite differences in technology.
- The policy should recognize Battery Electric Vehicles (BEVs) and genuine Range Extended Electric Vehicles (REEVs) separately.
- Greater emphasis on charging infrastructure and performance-based incentives is recommended.
Pakistan’s draft Automotive and Auto Parts Manufacturing Policy 2026–31 aims to electrify transport and reduce petroleum imports, but faces criticism for treating all electric vehicles (EVs) equally. The policy currently provides the same 1% sales tax treatment for Battery Electric Vehicles (BEVs), Range Extended Electric Vehicles (REEVs), and Plug-in Hybrid Electric Vehicles (PHEVs), despite their differing technologies and benefits.
A core weakness of the policy is its uniform approach to incentives, which could undermine the development of genuine electric propulsion technologies. According to the policy, BEVs, REEVs, and PHEVs are treated interchangeably, despite significant differences in their propulsion architecture and electric-driving capability.
Properly defined REEVs, which are driven exclusively by an electric traction motor with an internal-combustion engine functioning only as an onboard generator, can provide the benefits of electric propulsion while addressing Pakistan’s range anxiety and limited charging infrastructure. PHEVs, on the other hand, can directly participate in propulsion, making them a separate transitional category.
The policy should differentiate incentives based on the degree of genuine electrification and petroleum displacement. BEVs and genuine REEVs should receive stronger incentives, while PHEVs should be linked to measurable performance, including electric-only range, battery capacity, fuel consumption, emissions, and demonstrated petroleum displacement.
The charging-infrastructure challenge is another critical issue. The draft policy proposes reducing import duty on charging stations to 1% and considering viability-gap funding for battery-swapping infrastructure. However, these measures should be part of a broader national charging strategy covering highways, cities, commercial fleets, residential locations, and fast-charging corridors.
Without adequate charging infrastructure, consumer adoption of pure electric vehicles will remain constrained. The policy’s financing proposal is a welcome step, increasing the NEV financing limit from Rs3 million to Rs10 million and extending the financing tenor from three to five years. Such support should remain focused on genuine NEV technologies and be differentiated according to the degree of electrification and environmental performance.
The wider policy framework has considerable merit, with mandatory export obligations moving Pakistan’s automotive industry away from an almost exclusively domestic-market orientation. For cars, jeeps, and SUVs, exports are proposed to rise to 12% of factory-gate production value by 2029–30, with similar requirements thereafter. Across OEMs and auto-parts manufacturers, the policy aims to increase domestic value addition and foster greater competition and technology adoption.
Experts recommend that the policy should be more nuanced, recognizing the differences between BEVs, REEVs, and PHEVs. This would create a more rational incentive structure and accelerate Pakistan’s transition towards electrification. The objective should be to reward the degree of genuine electrification and petroleum displacement, rather than simply the presence of a battery or a plug.
