The federal government is considering major tax relief measures in Budget 2026-27 that could reduce prices of locally assembled vehicles and electric vehicles (EVs) across Pakistan. According to official sources, authorities are reviewing proposals aimed at lowering taxes on raw materials used by domestic automobile manufacturers to strengthen the local auto industry.
Under the proposed framework, customs duty on completely knocked down (CKD) kits may fall to 5% for non-localised parts and 10% for localised components. Officials expect the revised auto policy and federal budget to take effect from July 1, introducing incentives designed to support local manufacturing and reduce production costs.
Moreover, the government plans to encourage domestic auto parts production, create skilled employment opportunities, and gradually reduce dependence on imported vehicles and components.
Government expands focus toward new energy vehicles
Officials stated that the upcoming policy may broaden the current EV framework to include all New Energy Vehicles (NEVs), including hybrid, plug-in hybrid, range-extended, and fuel cell vehicles.
Furthermore, authorities are considering concessional tariffs for these vehicle categories while giving locally assembled EVs preferential treatment over fully imported units. Proposals also include limited concessions allowing local companies to assemble electric bikes, rickshaws, and passenger vehicles.
Sources added that each eligible company could receive duty concessions on up to 100 vehicles until June 30, 2027, to promote local investment and technology development.
Industry consultations continue ahead of policy announcement
In line with the National Tariff Policy, the government is also reviewing plans to eliminate Additional Customs Duty and reduce Regulatory Duty on automotive imports and components.
Meanwhile, the Pakistan Association of Automotive Parts and Accessories Manufacturers proposed further tax incentives, including reduced taxation for battery electric and hybrid vehicles.
Special Assistant to the Prime Minister Haroon Akhtar Khan recently chaired consultations with representatives from major automotive industry organizations. Officials confirmed that policymakers will finalize recommendations through consensus to ensure industry participation and long-term sector growth.
