Having watched the solar sector stomach similar scares year after year, one braces for a repeat. The Finance Bill presented on Friday, for once, does something far more sensible.
What the budget actually did
All exemptions under the Automotive Industry Development and Export Policy (AIDEP) 2021-26, which were due to lapse on June 30, have thankfully been extended for another year till June 30, 2027. The sales tax exemption for completely knocked-down kits for locally assembled electric vehicles remains. The excise exemption stays. The customs concessions stay. The locally assembled electric car that a middle-class family has been eyeing pays nothing new.
New taxation has instead been reserved for the very top. As per the bill, imported fully built electric cars, SUVs, and pickups will now attract a levy based on import value: zero per cent up to Rs20 million, 30pc between Rs20 and Rs30m, and 40pc above that. Imported petrol cars between 2,000cc and 3,000cc face a 40pc excise (41pc above 3000cc), with electric vehicles exempted till June 2027. Hybrids, thankfully, have been left untouched.
Annual renewals are no substitute for a policy, so the National Electric Vehicle policy needs to be finalised before the current extension expires
Protecting the affordable end of the market whilst taxing luxury imports is the right call, and credit must be given where it is due. After years of policy flip-flops, a budget that gets the direction right is itself worth noting.
The one-year problem
However, calls for celebrations are early. The bill gets the most important thing wrong, and it is not a tax rate but a date.
AIDEP was a five-year policy, and that is precisely why it worked. Investors who set up electric vehicle (EV) assembly in Pakistan did so because the rules were guaranteed till 2026. That policy has now expired, and its successor, the long-promised National Electric Vehicle policy, is still nowhere to be seen. In its place, the industry has been handed a twelve-month extension.
No investor builds an assembly plant, a battery line or a charging network on rules that expire before the machinery clears the port
No investor builds an assembly plant, a battery line or a charging network on rules that expire before the machinery clears the port. The solar sector knows this all too well. This year’s proposed 18pc general sales tax on solar panels, thankfully, dropped from the final bill, but still moved market prices by Rs7,500 to Rs9,000 per panel on rumours alone.
Net-metering agreements were cut from seven years to five. Financing schemes have been extended and then left unfunded. The EV sector is now being run on the same one-year-at-a-time approach. Our problem, in effect, is not taxation but the short policy horizons.
A battery on wheels
There is also a bigger opportunity that the budget has missed entirely. An electric vehicle is essentially a battery on wheels. Pakistan’s rooftops now produce more daytime solar power than the grid can comfortably absorb, whilst our cars sit parked through exactly those hours.
An EV charged at midday runs on cheap Pakistani sunshine instead of imported petrol, easing pressure on the grid and the import bill alike. After the closure of the Strait of Hormuz earlier this year reminded us what dependence on imported fuel really costs, this is not a small detail.
But none of it happens on its own. It requires time-of-use tariffs that make midday charging cheaper than evening charging, and it requires charging stations to exist at scale. The Finance Bill provides neither, because electric vehicles are still being treated as a revenue line for the auto sector rather than as an energy policy.
The way forward
Three steps are highlighted here. Firstly, finalise the National Electric Vehicle policy with a proper five-year horizon, well before the current extension expires in June 2027. Annual renewals are no substitute for a policy.
Secondly, introduce time-of-use electricity tariffs so that the vehicles being protected charge when our rooftops are generating, and not at the 7pm peak that runs on imported fuel.
Lastly, commit a defined share of the new excise on large petrol cars to public charging infrastructure. If it is meant to be a carbon levy, it should behave like one.
The instincts in this Finance Bill are sound, and that deserves to be said plainly. What is missing is consistency: rules that survive longer than a single fiscal year, regardless of which government is running the show. Our economic and energy future depends on it.
The writer is an advocate of renewable energy and the CEO of Solar Citizen. Email: mujtaba.raza@solarcitizen.pk
Published in Dawn, The Business and Finance Weekly, June 15th, 2026