Auto illusion

Pakistan's draft auto policy 2026-31 proposes lofty targets, including $6bn in exports and reduced import tariffs, but lacks a clear strategy to achieve these goals. While the policy aims to promote electrification and exports, it employs conflicting incentives that may undermine these objectives. A sales tax of 9pc on plug-in hybrid electric vehicles contrasts sharply with an 18pc standard rate, effectively giving PHEVs a tax advantage over battery EVs that eliminate petrol consumption entirely.

By doing so, the government risks encouraging consumers to remain reliant on fossil fuels rather than transitioning to fully electric vehicles. This appears to be a concession to pressure from hybrid carmakers rather than a consistent technological framework. The policy's export ambition is also questionable, as it envisions a rise in vehicle and parts exports without a production strategy.

China and Korea's auto producers have not authorized their Pakistani partners to manufacture or assemble their brands for international markets, making the targets appear to be wishful planning. Lowering taxes on Chinese vehicles while assemblers rely on imported components could perpetuate low-value assembly and put local vendors at a disadvantage against cheaper imported parts.

Furthermore, tariff liberalization may not be entirely misguided but must be balanced with protection that sustains efficiency and a time-bound framework to help producers reach scale. The policy as it stands risks subsidizing petrol-dependent technology, weakening local autoparts makers, and promising exports the industry cannot deliver.