ISLAMABAD — In a decisive policy shift aimed at accelerating the adoption of green transport, the government has finalized plans to introduce an Automotive Development Levy (ADL) ranging from 2% to 10% on both imported and locally manufactured internal combustion engine (ICE) vehicles, according to reporting by officials.
Under the new framework, the levy targets conventional petrol- and diesel-powered vehicles, though specific exemptions have been carved out to protect smaller consumer segments. Public service vehicles and engines up to 2000cc will face the minimum levy, while vehicles with engine capacities up to 1000cc, tractors, and imported or locally manufactured two- and three-wheelers are entirely exempt from the charge, which carries a sunset clause for the policy duration.
The broader economic strategy seeks to build on the sharp manufacturing surge witnessed in the green vehicle sector. Verified dispatches reviewed by officials indicate that production for electric bikes and rickshaws climbed dramatically from 21,656 units in fiscal year 2024 to 226,106 units projected for fiscal year 2026, while New Energy Vehicle (NEV) cars and SUVs expanded from a mere 42 units to 16,126 units, largely bolstered by a concessionary 1% sales tax under previous automotive guidelines.
Looking ahead, the administration intends to preserve affordability for eco-friendly alternatives while steering the market toward complete electrification. The 1% sales tax on battery electric vehicles (BEVs) will continue, alongside rates of 6% for range-extended electric vehicles (REEVs) and 9% for plug-in hybrid electric vehicles (PHEVs), provided qualifying models feature an external charging source and a minimum pure battery range of 50 kilometers under normal conditions.