For Pakistanis hoping to buy a car, a significant shift may be on the way. Prime Minister Shehbaz Sharif on Tuesday approved cutting the sales tax on locally assembled and imported battery electric vehicles (BEVs) to just 1% and agreed to substantial import tax cuts under a new five-year auto policy, according to The Express Tribune.
The final draft, endorsed by a committee led by Law Minister Azam Nazir Tarar after months of talks, will now go to the International Monetary Fund for approval, then to the federal cabinet, before a bill is presented in parliament to enforce the new rates.
Tax rates by vehicle type
Under the draft 2026-31 policy, new energy vehicles are split into three categories: BEVs will pay 1% sales tax, range-extended electric vehicles 6% and plug-in hybrids 9%. Conventional hybrids and petrol or diesel vehicles will be treated equally on duties and taxes.
For the first two years, small electric vehicles worth under $15,000 (about Rs4.2 million) will attract a reduced 5% import tariff. The premier also endorsed raising the financing limit for new energy vehicles from Rs3 million to Rs10 million, with the tenor extended from three to five years.
A new levy on petrol cars
The prime minister also approved a 2% to 10% levy on internal combustion engine vehicles, expected to raise about Rs232 billion over five years and intended to push car assemblers to export more. Petrol vehicles above 2,000cc and electric vehicles costing more than $75,000 will face higher federal excise duty.
What it could mean for prices
According to the paper, the Suzuki Alto's price would fall from Rs3.2 million to about Rs2.845 million this fiscal year, while the Wuling Bingo electric car in the same category could drop from Rs4 million to Rs2.7 million. The Suzuki Cultus could fall from Rs4.3 million to Rs3.8 million. All the rates remain subject to IMF approval.