Not all EVs are equal: rethinking Pakistan’s auto policy

Pakistan’s draft Automotive and Auto Parts Manufacturing Policy for 2026-31 aims to electrify transport, reduce petroleum imports, boost the industry, and promote exports. While the proposed shift to exports, higher value addition, competition, and technology adoption is significant, the policy fails to distinguish between different electric vehicle technologies.

The current proposal gives all electric vehicle types the same tax treatment, despite differences in their propulsion architecture and petroleum displacement potential. The policy should recognize battery electric vehicles and genuine range extended electric vehicles as separate electric propulsion technologies. Plug-in hybrid electric vehicles should be treated as a distinct transitional category.

Incentives should be linked to measurable performance, such as electric-only range, battery capacity, fuel consumption, emissions, and demonstrated petroleum displacement. Greater attention should be given to Pakistan's charging infrastructure challenge, as consumer adoption of pure electric vehicles will remain limited without adequate charging infrastructure.

The policy's financing proposal, including increasing NEV financing limits, is a welcome step. The export-oriented objectives, mandatory export obligations, and export-linked support mechanisms also show promise. However, export incentives should focus on incremental exports, higher domestic value addition, and genuine integration into global supply chains.

The proposed Minimum Domestic Value Addition framework is a positive development, although localization should move beyond final assembly towards strategic components. The tariff rationalization, if implemented consistently, could significantly increase competition and improve manufacturing productivity, pricing, technology, and product quality.