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MoIP Proposes 50% Increase in Regulatory Duties on Import of EV and HEV CBUs

It has been almost three months since the implementation of the Automotive Industry Development and Export Plan (AIDEP) 2021-26 which provided a number of benefits to the automakers in Pakistan to increase business for locally manufactured vehicles in Pakistan.

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Most of the benefits have been reserved for Electric Vehicles and Hybrid Electric Vehicles under the Automotive Industry Development and Export Plan 2021-26 but the government thinks that these incentives have led to a vast increase in the imports of high-end vehicles. Consequently, the Ministry of Industries and Production (MoIP) has proposed that the rate of Regulatory Duties on the import of Completely Built-Up Electric Vehicles (EVs) and Hybrid Electric Vehicles (HEVs) be increased to 50 percent.

According to our source, this increase in the Regulatory Duties (RD) has not been enacted by the government. He explained that the government is considering making this change to improve the current account deficit caused by a large number of imports.

The source added that the matter will be discussed in the upcoming meeting of the Traffic Police Board.

The following are the recommendations to discourage the import of EVs as CBUs:

  • Imposition of 50 percent RD on the import of CBU EVs with battery packs of over 50 kWh.
    Rationale: Due to a decrease in Customs Duties, the import of high-end EVs has increased, expanding the current account deficit as well. The RD is to be increased to discourage the import of CBU EVs.
  • RD on HEVs to be increased from 15 percent to 50 percent. The increase will be applicable to vehicles with an engine capacity of between 1.5 liters and 1.8 liters.
    Rationale: The intervention will enable the improvement of the current deficit and will encourage the local assembly of HEVs in Pakistan.
  • The RD on Internal Combustion Engine vehicles to be increased from 15 percent to 50 percent as well.
    Rationale: The intervention will enable the improvement of the current deficit and will encourage the local assembly of all the vehicles in Pakistan.
  • Federal Excise Duty on locally assembled vehicles with an engine capacity over 1.5 liters is to be increased from five percent to ten percent. Similarly, the Federal Excise Duty on locally CBU vehicles with an engine capacity of between 1.5 liters and 1.8 liters is to be increased from five percent to ten percent.
    Rationale: The increase shall be temporary to deal with the ongoing financial crunch.

The Pakistani car market is yet to see the results of the benefits offered to the car industry under the new auto policy. This is because it will take some time for the automakers to adapt to the government’s goals of the local manufacturing of EVs and HEVs in Pakistan while it has been only three months since the launch of the AIDEP 2021-26.

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However, reports suggest that the imports of high-end CBU EVs increased significantly during the last few months, which implies that the government might have to go back to the drawing board and reassess the EV policy.

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