By Khawar Azhar
The prolonged delay in announcing a new automobile policy, following the expiry of the previous policy on 30 June 2026, is fuelling concerns that influential industry lobbies are pressuring the government to continue extending incentives for expensive new-energy vehicles (NEVs), while ordinary car buyers receive no meaningful relief.
Pakistan remains under the IMF’s Extended Fund Facility (approved in September 2024) and the Resilience and Sustainability Facility. Following the third review in May 2026, total disbursements under both programmes reached approximately $4.8 billion. A key objective of the IMF programme is to broaden the tax base and phase out poorly targeted subsidies.
Despite this, entry-level vehicles such as the Suzuki Alto (priced between approximately PKR 2.99 million and PKR 3.33 million) and Suzuki Cultus (PKR 4.09 million to PKR 4.59 million) continue to bear the full burden of General Sales Tax (GST), the climate/NEV adoption levy, and higher withholding taxes for non-filers. These mass-market vehicles receive no subsidy or fiscal incentive despite serving the country’s largest segment of car buyers.
A comparison of two current models illustrates the disparity. The Suzuki Alto, priced at around PKR 3 million, attracts approximately PKR 543,000 in combined Sales Tax, Federal Excise Duty and NEV levy, a tax burden of roughly 18 percent of the vehicle’s price. The Deepal, a new-energy vehicle priced at around PKR 10 million, attracts only around PKR 100,000 in sales tax, with no FED and no NEV levy applied, a burden of roughly 1 percent. In absolute terms, a buyer of Pakistan’s cheapest hatchback pays more than five times the tax of a buyer of a vehicle over three times its price.
In contrast, the New Energy Vehicle Policy 2025–30 and related measures provide a range of incentives, including concessional tax treatment and policy support for NEVs. While the most direct subsidies currently focus on two and three-wheelers, four-wheel NEVs also benefit from reduced sales tax and other favourable measures. Critics argue that these incentives disproportionately benefit premium vehicles, many priced at PKR 10 million or more, and primarily serve affluent consumers.
Industry sources contend that the absence of a new auto policy has created a vacuum that competing interest groups are attempting to influence. “The IMF is calling for fiscal discipline and the removal of untargeted subsidies, yet ordinary Pakistanis continue to pay full taxes on basic hatchbacks while expensive new-energy vehicles enjoy preferential treatment,” one industry source said. “It raises a fundamental question: are scarce public resources, supported by IMF financing, being allocated in a fair and equitable manner?”
With no clear timeline for the announcement of a new automobile policy, uncertainty continues to weigh on the industry. At the same time, criticism is growing that the government’s current approach appears to favour premium green mobility over affordable transportation for the broader population.
The writer is a Communication Expert working for more than 25 years and car enthusiast.
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