Automotive Levy: Pakistan Proposes 2% to 10% Charge on Petrol and Diesel Vehicles

Automotive Levy of 2% to 10% is set to be introduced on imported and locally manufactured petrol- and diesel-powered vehicles as the government seeks to accelerate the adoption of new energy vehicles (NEVs) under its NEV Policy 2025-30, The Express Tribune reported.

The proposed Automotive Development Levy (ADL) will apply equally to imported and locally manufactured internal combustion engine (ICE) vehicles. Lower rates are proposed for public service vehicles and vehicles with engine capacities of up to 2,000cc.

However, two- and three-wheelers, tractors and vehicles with engine capacities of 1,000cc or less will be exempt from the levy.

The charge will remain applicable throughout the policy period and include a sunset clause. Revenue generated through the levy will be used to support research and development, vendor development, duty and tax reimbursements, third-party audits and the Pakistan Automotive Testing Institute.

Under the proposed tax structure, battery electric vehicles (BEVs) will continue to attract 1% sales tax, while range-extended electric vehicles (REEVs) and plug-in hybrid electric vehicles (PHEVs) will face rates of 6% and 9%, respectively.

To qualify for NEV concessions, vehicles must have an external charging facility and provide a minimum electric range of 50 kilometres on a single charge. However, NEVs valued above $50,000 will be subject to standard sales tax.

The policy also proposes abolishing Federal Excise Duty (FED) on ICE vehicles with engine capacities of up to 1,000cc and exempting eligible NEVs from FED, Special Excise Duty, Capital Value Tax and Withholding Tax, except vehicles exceeding the $50,000 value threshold.

For imported fully built BEVs valued below $15,000, customs duty will be reduced to 5% during FY27 and FY28. The concession will be subject to bank guarantees and a commitment to establish local assembly or manufacturing operations by September 30, 2028.

The customs duty will subsequently increase to 20% in FY29 before declining to 15% in the final policy year, 2030-31. Imported BEVs valued at $15,000 or above will initially attract a 25% customs duty, which will gradually fall to 15% by 2030-31.

The State Bank of Pakistan will also consider increasing the maximum automobile financing limit for NEVs from Rs3 million to Rs10 million and extending the repayment period from three to five years.

Meanwhile, the existing zero customs duty on imported electric vehicle charging stations will continue, subject to a review during the policy’s second year.

The Ministry of Industries and Production, Engineering Development Board and National Energy Efficiency and Conservation Authority will also coordinate with industry stakeholders to introduce battery-swapping and rental arrangements to reduce the upfront cost of electric vehicles.

According to the policy figures, production of electric motorcycles and rickshaws increased from 21,656 units in FY24 to 226,106 units in FY26. Meanwhile, NEV car and SUV production rose from just 42 units to 16,126 units over the same period.

The proposed measures are aimed at expanding local NEV production, encouraging investment in the electric vehicle supply chain and making cleaner transportation more accessible.