NEV policy dispute intensifies

Pakistan's proposed New Energy Vehicle (NEV) policy, designed to accelerate the shift towards cleaner mobility by reducing emissions and oil imports, promoting transport electrification and developing a local EV ecosystem, is rapidly turning into one of the most contested industrial policy disputes in recent years. Conventional auto assemblers and hundreds of local parts manufacturers warn that the framework may unintentionally damage the very manufacturing base it claims to modernise.

Industry stakeholders also fear that the draft policy may fail to fully serve the government's own long?term electrification ambitions. While the framework aims to push Pakistan towards a 30% NEV adoption target by 2030, critics argue that placing plug?in hybrid electric vehicles (PHEVs) in the same incentive bracket as fully electric vehicles could actually slow the transition towards pure battery electric vehicles (BEVs).

Executives and vendors believe the proposed incentives will make PHEVs significantly more attractive than fully electric vehicles because consumers in Pakistan still face severe infrastructure limitations, particularly the absence of a reliable nationwide charging network. Although the draft policy proposes 3,000 charging stations by 2030, the existing charging infrastructure remains extremely limited for a country of Pakistan's size.

Industry officials say consumers purchasing vehicles for intercity and inter?provincial travel are unlikely to rely entirely on electric mobility in the near future. Instead, many buyers may prefer PHEVs because they provide a backup petrol engine whenever charging facilities are unavailable.

"The customer will naturally choose the safer option," said an industry executive familiar with the policy discussions. "If a person is unsure whether they will find a charging station on a motorway, in another city or even within urban centres, they will prefer a vehicle that can switch back to petrol."

Executives argue that instead of accelerating the shift towards zero?emission transport, the proposed structure could widen the commercial gap between BEVs and PHEVs. Since fully electric vehicles still carry higher battery costs, generous incentives for plug?in hybrids may pull consumers away from BEVs rather than towards them.

The draft policy broadly groups battery electric vehicles (BEVs), plug?in hybrid electric vehicles (PHEVs), range?extended electric vehicles and fuel?cell vehicles under the NEV umbrella. For four?wheelers, even PHEVs capable of travelling just 50 kilometres in electric?only mode would qualify for incentives under the policy.

Executives associated with Japanese auto brands say the proposed tax regime could sharply narrow the price gap between PHEVs and conventional petrol vehicles, placing internal combustion engine (ICE) vehicles in an increasingly vulnerable position despite decades of localisation investment.

"What doesn't happen elsewhere in the world, happens here," said a senior official of a Japanese automobile manufacturer. "Globally, there is a distinction between pure electric vehicles, hybrids and plug?in hybrids. Pakistan is removing that distinction."

Former Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) Chairman Aamir Allawala believes the policy is blurring the line between genuinely zero?emission vehicles and transitional technologies.

"BEVs are zero?emission vehicles and should be encouraged, but PHEVs still have engines, fuel tanks and exhaust systems. They are not zero?emission vehicles," he said.

Allawala warned that placing PHEVs in the same fiscal category as BEVs could make localisation commercially unviable, particularly when local vendors continue paying 18% sales tax on imported raw materials while imported or assembled PHEVs enjoy aggressive incentives.

He argued that while some incentives for plug?in hybrids may be justified, they should not receive the same treatment as fully electric vehicles. "There has to be a distinction," he added.

The draft policy itself acknowledges that most four?wheeler NEVs entering Pakistan are likely to be imported initially and warns that such dependence could worsen the balance of trade if localisation does not follow. Yet industry representatives say the proposed framework does not impose sufficiently strong localisation obligations on companies benefiting from concessions, and have now been included under the policy umbrella.

The policy argues that NEVs can reduce Pakistan's oil import bill, improve urban air quality and lower long?term transport costs. It estimates cumulative fuel savings of more than Rs537 billion by 2030 alongside broader environmental and health gains. The framework also proposes 3,000 charging stations nationwide by 2030, dedicated green financing mechanisms and large?scale workforce development initiatives.

Several stakeholders are now urging the government to adopt a stricter battery electric vehicle?focused framework rather than a broad NEV regime that includes PHEVs. They said that countries moving aggressively towards electrification are increasingly prioritising pure electric vehicles while treating plug?in hybrids as a temporary bridge technology rather than a long?term solution.