Pakistan's transition to electric mobility faces financing, infrastructure and implementation challenges that could affect its long-term objectives unless a sustainable financing model and coordinated policy execution are established, the State Bank of Pakistan (SBP) said in its Half-Year Economic Report.

The central bank said accelerating implementation of the National New Energy Vehicle (NEV) Policy 2025-30 is important to reduce the economy's exposure to international oil price volatility. The transport sector currently accounts for nearly 10% of Pakistan's carbon emissions, while the country has an average annual oil import bill of US$ 15.8 billion.

Based on stakeholder consultations and lessons from the 2019 EV policy, which experienced delays amid pandemic-related disruptions, the new strategy aims to promote environmental sustainability, reduce import dependence, improve energy efficiency and modernise domestic assembly lines.

The NEV strategy is structured around four areas: affordability, charging infrastructure, consumer incentives and institutional coordination.

Under the affordability pillar, the government aims for NEVs to account for 30% of all new vehicle sales by 2030, equivalent to more than two million units, including 54,000 electric bikes and 100,000 electric four-wheelers. The target increases to 50-90% by 2040, with the government targeting a fully net-zero fleet by 2060.

The plan also targets 90% localisation within two years, with more than 60 manufacturing licences issued to two- and three-wheeler producers. The government is providing direct purchase subsidies of up to PKR 65,000 (US$ 235) for e-bikes and PKR 400,000 for e-rickshaws under schemes such as PAVE. The programme has an initial allocation of PKR 9 billion, with 25% reserved for women.

Four-wheeler buyers are eligible for battery incentives of up to PKR 15,000 per kWh, a 50% reduction in registration fees, toll exemptions and relaxed SBP auto-finance terms. The policy also mandates the electrification of public transport and requires government fleets to switch entirely to NEVs after 2027.

Infrastructure plans call for 3,000 public charging stations by 2030, including 40 fast-charging stations along the Karachi-Peshawar corridor. The charging network will be supported by a 44% discounted electricity tariff capped at PKR 39.70 per kWh.

The newly established New Energy Vehicles Centre (NEVC) will oversee standards, conduct quarterly progress assessments and coordinate between federal and provincial authorities.

The SBP report also identifies financing and implementation risks. The policy's central PKR 122 billion feebate funding pool relies entirely on a 1-3% levy on conventional internal combustion engine (ICE) vehicles.

The central bank said a decline in conventional car sales could reduce the funds available for subsidies. It noted that countries such as India, which provides upfront ex-factory subsidies of 20-40%, and Malaysia, which provides individual tax rebates of MYR 2,400 (US$ 595), use different funding mechanisms.

Low initial EV adoption is limiting commercial returns for charging operators. The SBP has recommended state-led deployment of chargers in urban centres, citing approaches adopted in Brazil and Indonesia.

Implementation is also affected by differences over plug-in hybrid electric vehicles (PHEVs), which currently receive the same duty-free incentives as pure battery electric vehicles (BEVs), as well as investor concerns about changes in policy.

To support local manufacturing, the government has introduced fiscal incentives for electric four-wheelers, including a 1% customs duty on specialised EV components, zero sales tax on parts and a fixed 1% General Sales Tax (GST) rate for vehicles with battery capacities below 50 kWh. The vehicles are also exempt from Federal Excise Duty (FED). PHEVs, by contrast, face an 8.5% GST rate, a 3% customs duty on parts and capacity-based FED.

Domestic four-wheeler plants are required to comply with UNECE WP.29 global standards to qualify under the policy framework.

Automakers must meet requirements covering crash safety under UN R94 and R95, high-voltage isolation and thermal safety under UN R100, electromagnetic compatibility under UN R10, and mandatory anti-lock braking and electronic stability control systems under UN R13-H.