Pakistan plans toll tax exemption for electric and hybrid vehicles under new auto policy
By Tanveer Ahmed :
The Pakistani government is considering removing toll taxes for electric and hybrid vehicles on motorways and national highways as part of a broader strategy to promote environmentally friendly transport and modernise the country’s automobile sector.
The proposal is expected to be included in the upcoming Auto Policy 2026–31, which aims to encourage the adoption of clean energy vehicles and attract greater investment into Pakistan’s automotive industry.
Officials say the planned incentives would apply to New Energy Vehicles (NEVs), including Battery Electric Vehicles, Plug-in Hybrid Electric Vehicles and Fuel Cell Electric Vehicles. These vehicle categories are viewed as more environmentally sustainable because they produce significantly lower emissions than conventional petrol and diesel-powered cars.
The proposed toll tax exemption is being seen as one of several measures intended to accelerate the shift towards electric mobility in Pakistan amid growing concerns over fuel import costs, urban pollution and climate-related challenges.
Government officials believe encouraging the use of electric and hybrid vehicles could help reduce the country’s dependence on imported petroleum products while contributing to cleaner air in major cities where pollution levels have continued to rise.
The initiative forms part of wider reforms being prepared for Pakistan’s automobile industry over the next several years.
According to officials familiar with the proposed framework, Additional Customs Duties on vehicles are expected to be phased out completely by the fiscal year 2029, while Regulatory Duties may be reduced by as much as 80% by 2030.
Authorities say the reforms are aimed at creating a more competitive automobile market and encouraging both domestic and foreign investment in the sector.
The policy also proposes gradually ending Special Regulatory Orders by 2030. These orders have historically provided tariff protections and incentives to local car manufacturers, but the government now appears to be moving towards a more open and competitive market structure.
Import duties on Completely Built Unit vehicles are also expected to decline over the next five years. Current duties, which range between 50% and 100%, may be reduced to between 35% and 75% under the proposed policy framework.
Meanwhile, tariffs on Completely Knocked Down units imported vehicle parts used for local assembly — are likely to fall from 30% to 20%, according to reports linked to the policy discussions.
Officials believe reducing duties on imported components could strengthen Pakistan’s local vehicle assembly industry and encourage international manufacturers to establish or expand operations within the country.
At the same time, the government is reportedly linking electric vehicle incentives to localisation requirements, meaning companies benefiting from policy concessions may also be required to increase domestic production and use locally manufactured parts.
Industry experts say such measures could help Pakistan develop a stronger automotive supply chain while supporting employment and industrial growth.
The government has increasingly signalled support for electric mobility in recent years as part of wider economic and environmental reforms. Earlier initiatives included incentives for electric motorcycles, charging infrastructure development and support schemes aimed at increasing adoption of cleaner transportation technologies.
Prime Minister Shehbaz Sharif has previously emphasised the importance of reducing fuel imports and modernising industrial sectors through technology-driven reforms and green energy policies.
Analysts say the success of the new auto policy will depend on implementation, charging infrastructure expansion, affordability of electric vehicles and investor confidence in Pakistan’s manufacturing environment.
Despite challenges including high vehicle prices and limited charging networks, experts believe the planned reforms indicate a growing policy shift towards sustainable transport and long-term industrial modernisation.
If fully implemented, the incentives could make electric and hybrid vehicles more attractive to consumers while aligning Pakistan more closely with global trends favouring low-emission and energy-efficient transportation systems.
Observers say the proposed toll tax exemption, combined with broader tariff reforms, could become one of the most significant changes in Pakistan’s automotive policy landscape in years as the country attempts to balance economic growth with environmental sustainability.
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