Government Shares Final Draft of New Auto Policy with IMF, Promising Lower Local Car Prices and Sweeping EV Incentives
ISLAMABAD: Finally, after being approved by the Prime Minister, the federal government has released the final copy of its comprehensive new national auto policy to the International Monetary Fund (IMF).
The structural policy framework should provide a significant relief to consumers through lower prices of locally made cars. Buyers are not to be burdened by unexpected increases in the price of the vehicle and/or surcharge after bookings have been made, as per the new guidelines. There are also a host of incentives designed to encourage the uptake of electric vehicles (EVs), and penalties for carmakers who don’t meet regulatory targets, in the five-year plan. The government’s total cost benefit from the policy is estimated to be Rs1,764 billion.
Promoting the EV transition with tariffs and duties.Tariffs and Duties and the EV transition.
Custom duty on conventional vehicles will be gradually reduced up to 80 per cent to accelerate sustainability and modernisation of the transport sector. In the case of electric vehicles, the draft will exempt them from all Federal Excise Duty (FED), Capital Value Tax (CVT), and the withholding tax. Moreover, import charges for charging station equipment will be reduced to a nominal 1 percent.
Financial facilitation for consumers to purchase green vehicles includes a financial limit of Rs10 million for auto financing for EVs, with a longer repayment period of 5 years.
Compliance with rigorous regulation: rules and compliance deadlines.Compliance with rigid regulatory requirements: rules and regulatory deadlines.
Now the automakers in Pakistan will abide by six strict guiding principles. Companies will be liable under law and finance if there is an increase in price after the booking is made and the manufacturers will be legally obliged to offer a specific delivery date at the time of booking.
In addition, mandatory export targets have been set: the tractor and motorcycle and the rickshaw manufacturers, auto parts manufacturers are set export targets of 15 per cent, and the passenger car manufacturers 20 per cent. Businesses that are not achieving these export levels will be liable to significant penalties, such as extra customs duties.
Projected Economic Impact and Savings
The government expects to earn Rs288 billion in net profit and Rs485 billion in adjusted federal excise duty over the next five years. The move towards fuel-efficient and electric alternatives is likely to generate unprecedented ‘import substitution’ savings of over Rs1,226 billion in foreign exchange, crucially.