Local cars, EVs prices likely to fall in Budget 2026–27

ISLAMABAD: Prices of locally assembled cars and electric vehicles (EVs) are expected to decline in the coming months as the federal government considers tax relief on raw materials in the upcoming Budget 2026–27.

According to sources, the government is reviewing proposals to reduce taxes on materials used in the production of local vehicles to promote the domestic auto industry.

Under the proposed measures, customs duty on CKD (completely knocked down) kits may be set at 5% for non-localised parts and 10% for localised components.

The new budget and auto policy, expected to take effect from July 1, will include a range of incentives aimed at strengthening the local auto sector.

The government is also considering steps to boost local manufacturing of auto parts, create employment opportunities for skilled workers, and reduce reliance on imports.

Focus on electric and new energy vehicles

Sources said the upcoming policy may expand the scope of the electric vehicle (EV) framework beyond battery electric vehicles to include all New Energy Vehicles (NEVs), such as hybrid, plug-in hybrid, range-extended, and fuel cell vehicles.

These vehicles are likely to be offered concessional tariffs, while locally assembled EVs may be given preferential treatment over fully imported units.

Proposals also include allowing local companies limited concessions to assemble electric bikes, rickshaws, and cars. Each company may be allowed duty concessions on up to 100 vehicles, with the incentive expected to remain in place until June 30, 2027.

Tariff reforms and industry support

In line with the National Tariff Policy, the government is considering eliminating Additional Customs Duty (ACD) and reducing Regulatory Duty (RD).

The average tariff for local vehicles is proposed to be kept below 6%, while a gradual reduction in tariffs on fully imported petrol vehicles is also under review.

The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has recommended further incentives, including a 1% tax on battery electric vehicles and around 9% on hybrid and plug-in hybrid vehicles.

Consultations underway

A day earlier, Special Assistant to the Prime Minister on Industries and Production Haroon Akhtar Khan chaired a consultative meeting with key stakeholders from the auto sector.

The meeting was attended by representatives of the Pakistan Association of Automotive Parts and Accessories Manufacturers and the Pakistan Automotive Manufacturers Association.

Participants discussed proposed duties on auto parts and the broader framework of the upcoming auto policy. Officials said all proposals would be finalised through consensus to ensure industry input is fully incorporated.

The government reiterated that the primary objective of the policy is to strengthen local manufacturing, support domestic producers, and reduce dependence on imports.