ISLAMABAD — In a decisive push toward green mobility, the federal government has resolved to impose an Automotive Development Levy (ADL) ranging between 2% and 10% on both imported and locally manufactured internal combustion engine (ICE) vehicles, according to recent dispatches from The Express Tribune. The fiscal measure is engineered to accelerate the nationwide adoption of electric vehicles, backed by a structured vehicle classification framework and minimal levy floors applied specifically to public service vehicles and engine capacities up to 2000cc.
Elaborating on the exemption thresholds, the policy ensures that the levy will bypass imported and locally produced two- and three-wheelers, tractors, and smaller transport options with engine displacements capped at 1000cc. Furthermore, the newly introduced regulatory charge carries a defined sunset clause, ensuring it remains legally active strictly for the duration of the targeted policy period. Conventional petrol- and diesel-burning automobiles will bear the brunt of the tariff to level the playing field against cleaner alternatives.
The regulatory shift builds upon a massive surge in domestic manufacturing, as production figures for electric bikes and rickshaws climbed dramatically from 21,656 units in fiscal year 2024 to 226,106 units projected by fiscal year 2026. Simultaneously, output for New Energy Vehicle (NEV) cars and SUVs expanded from a negligible 42 units to 16,126 units. Because these affordable price points were heavily catalyzed by a concessionary 1% sales tax under the previous automotive framework, the state intends to preserve targeted incentives to maintain market momentum.
Looking ahead, the government will maintain the 1% sales tax exclusively for Battery Electric Vehicles (BEVs), whereas Range Extended Electric Vehicles (REEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) will attract adjusted sales tax rates of 6% and 9% respectively. To qualify for NEV status under the 2025-30 policy, vehicles must feature an external charging port and deliver a minimum operational range of 50 kilometers on a single battery charge, fostering a seamless technological transition toward pure electrification.