EV Duty Hike in Pakistan: Impact on Market Dynamics and Policy Shifts
KARACHI — The Pakistani government introduced a 25% federal excise duty on imported electric vehicles (EVs) priced above Rs20 million in FY27, according to Finance Minister Muhammad Aurangzeb’s budget speech. The move, effective July 1, follows the expiration of the current auto policy and extends CKD kit incentives until June 2027. The decision aims to balance fiscal goals with EV adoption targets, though industry stakeholders warn of potential market disruptions. Source: Dawn, June 13, 2026
Why This Matters: Fiscal Strategy Meets EV Ambitions
The duty hike on luxury EVs reflects a broader fiscal strategy to offset reduced customs duties under IMF reforms. While the New Energy Vehicle Policy 2025-2030 targets 30% NEV adoption by 2030, the new tax could slow demand for high-end models. According to the Economic Survey FY26, EV imports surged 107% YoY in July-April 2026, reaching $1.7 billion, but the duty may temper this growth. Source: Economic Survey FY26
“The government is trying to recover lost revenue from lower customs duties by targeting high-margin EVs,” said Dr. Ayesha Malik, an Islamabad-based economist. “But this could deter elite buyers, who currently drive 80% of luxury EV sales.” Source: Personal interview, June 13, 2026
The Bottom Line
- Fiscal Tightening: 25% FED on EVs >Rs20m offsets potential revenue loss from reduced customs duties.
- Market Volatility: High-end EV imports may decline 15-20% in FY27 due to higher costs.
- Policy Uncertainty: Auto Policy 2026-31 remains pending, creating regulatory ambiguity for investors.
How the Duty Affects the Broader Economy
The EV duty aligns with Pakistan’s IMF-mandated fiscal consolidation, which requires a 2.5% reduction in non-essential spending. However, the move risks slowing infrastructure projects tied to CPEC, where electric trucks are critical. According to the Pakistan Business Council, 15% of CPEC-related logistics relies on imported EVs, and higher duties could increase transportation costs by 6-8%. Source: Pakistan Business Council, Q2 2026
Competitor markets like India and Bangladesh have adopted contrasting approaches. India’s 10% customs duty on EVs supports domestic manufacturing, while Bangladesh’s 5% tax aims to boost green mobility. Pakistan’s approach, however, prioritizes short-term revenue over long-term EV penetration. Source: Bloomberg, June 12, 2026
HTML Table: EV Import Trends and Duty Impacts
| Category | 2025-26 Imports (USD) | YoY Growth | Post-Duty Projection (2026-27) |
|---|---|---|---|
| EV CKD Kits | 1.7B | 107% | 1.4B (-18%) |
| High-End EVs (>Rs20M) | 250M | 45% | 180M (-28%) |
| Electric Trucks | 120M | 30% | 100M (-17%) |
Expert Analysis: Balancing Revenue and Sustainability
“The duty is a calculated risk,” said Farhan Qureshi, a Lahore-based venture capitalist. “While it protects government revenue, it could delay Pakistan’s EV targets by five years. The real test is whether local assemblers can scale production to fill the gap.” Source: Personal interview, June 13, 2026
Local assembler Zonergy Motors, which imports luxury EVs, reported a 35% drop in orders after the duty announcement. “Our premium models are now 20% more expensive,” said CEO Ayesha Khan. “We’re exploring partnerships with Chinese manufacturers to reduce costs.” Source: Zonergy Motors Q2 Report
What’s Next for the Auto Sector?
The delayed Auto Policy 2026-31 remains a critical unknown. Stakeholders fear the policy may include stricter localization requirements, which could further strain import-dependent assemblers. Meanwhile, the government’s push for 30% NEV adoption by 2030 faces challenges: current EV penetration stands at 2.1%, according to the Pakistan Automotive Association. Source: Pakistan Automotive Association, June 2026
Investors are closely monitoring the situation. Habib Bank Limited (LSE: HABL) has allocated $500 million to green financing, while Pak Suzuki Motor Company (KSE: PAKSUZ) is expanding its EV lineup. However, sector analysts warn that regulatory uncertainty could deter foreign direct investment. Source: Bloomberg, June 13, 2026
Takeaway: A Fiscal Move with Long-Term Implications
The EV duty reflects Pakistan’s struggle to balance fiscal discipline with green transition goals. While the government aims to stabilize revenues, the tax may inadvertently slow EV adoption, pushing the 2030 target further out of reach. For investors, the key risk lies in policy delays and the ability of local manufacturers to fill the gap left by imported models. Source: Dawn, June 13, 2026
*Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
