Investment opportunities and incentives in Pakistan’s electric vehicle sector

Thursday 23 May 2024

Sahar Iqbal

Akhund Forbes, Karachi



According to the International Energy Agency, the number of electric vehicles (EVs) being driven globally is expected to have a rise from 11.3m as of 2020 to 51.7m in 2025 and further to 144.3m in 2030. Similarly, in Pakistan, there is significant potential for EV adoption in both the private and public sectors. The National Electric Vehicle Policy 2019 (EV Policy) and the subsequent Auto Industry Development and Export Policy 2021–2026 (AIDEP) have greatly incentivised the adoption of EVs in Pakistan, from both a consumer as well as a manufacturer standpoint. Therefore, this article will delve into investment opportunities in Pakistan's electric automobile sector, exploring challenges and the legal and regulatory landscape that fosters a conducive environment for investments in this sector.

Incentives for manufacturers under the AIDEP

The EV Policy aims to promote the adoption of EVs across various segments by outlining a comprehensive set of fiscal incentives targeting different types of EVs, charging infrastructure and battery technology for both consumers and manufacturers. Following the EV Policy, the AIDEP was launched in 2021, incorporating incentives provided under the EV Policy. Presently, the AIDEP serves as the overarching policy governing EV manufacturing and sales in Pakistan.

The AIDEP’s primary goal is to bolster the manufacturing sector in Pakistan, particularly for EVs and hybrid vehicles. Incentives for manufacturing include:

  • custom duty on EV-specific parts at one per cent;
  • sales tax fixed at one per cent for locally manufactured two and three-wheelers;
  • waiver of sales tax at the import stage for electric two and three-wheelers;
  • import of Completely Built Units (CBUs) for test marketing allowed at 50 per cent of prevailing custom duty;
  • import of all parts for manufacturing electric heavy vehicles at one per cent custom duty; and
  • import of electric buses, trucks and prime movers in completely built condition at one per cent custom duty.

These taxation benefits and manufacturing incentives are significantly attractive for manufacturers as well as consumers, given that the import duty on non-electric imported vehicles in Pakistan can go up to 300 per cent for luxury vehicles.

In addition to tariff incentives, the policy also addresses safety standards for EVs, charging infrastructure, hybrid technology and local parts manufacturing. It sets a target of 30 per cent local value addition for parts, provides tax credits for investment in manufacturing infrastructure and aims to promote local designs and quality control measures.

Investment opportunities in Pakistan’s two and three-wheeler EV sector

Pakistan is positioned perfectly to attract investment in the EV sector. In recent years, there has been a rise in significant automobile companies launching EVs in the country, such as Changan, Audi and Mercedes. However, while these companies come under the ambit of luxury and semi-luxury vehicles, statistics from the Pakistan Bureau of Statistics reveal that 53 per cent of households own a motorbike. Therefore, there is significant room for investments in the EV motorbike sector due to a large chunk of the population relying on motorbikes and rickshaws for transport.

For example, Velktra, a pioneering e-motorbike company, has emerged as a beacon for local EV production in Pakistan. Despite challenges, Velktra's manufacturing plant commenced operations in September 2023, marking the beginning of full-scale production. While this is just one example, the landscape is burgeoning for EV – bike adoption and this presents a significant and potentially fruitful opportunity for investors.

Therefore, the manufacturing of two and three-wheelers has been greatly incentivised under the AIDEP. For example, for two and three-wheelers, there is a custom duty of one per cent on EV-specific parts such as batteries, motors, converters and chargers until 30 June 30 2026. Additionally, locally manufactured two and three-wheelers will have a fixed sales tax rate of one per cent, subject to periodic review in consultation with stakeholders. Furthermore, sales tax at the import stage is waived off for electric two and three-wheelers but this is subject to periodic review. For test marketing purposes, companies can import up to ten CBUs of each variant at 50 per cent of the prevailing custom duty, limited to a maximum of 200 units per company across all variants.

Challenges faced by the EV sector in Pakistan

The most prominent challenge for investments in the EV sector in Pakistan is the hindrance towards the adoption of EVs in the country, with a primary issue being the lack of charging stations nationwide. Presently, the scarcity of evenly distributed charging stations across the country is the main obstacle for potential EV buyers. Although some individuals are beginning to purchase EVs as secondary or tertiary vehicles, many are hesitant to fully transition due to this exact reason.

However, the AIDEP tackles this challenge by proposing a strategy to install DC fast chargers in selected cities, with a minimum of one charger per three by three km grid initially, expanding to secondary cities subsequently. Along major motorways and highways, fast chargers will be placed every 15–30 km. Moreover, to manage grid load effectively, smart charging techniques such as smart metering and time-of-use pricing will be employed, particularly for Level-2 and above chargers. Initial emphasis will be on promoting two- and three-wheelers due to the relative ease of developing charging infrastructure for them. Major cities such as Karachi, Lahore, Rawalpindi, Faisalabad and Peshawar are earmarked for initial EV introduction, with plans for nationwide infrastructure expansion in the long term.


Key hindrances to investing in Pakistan’s automobile sector include high rates of import and customs duties, along with a general lack of incentives. However, the AIDEP aims to address these issues by significantly reducing tariffs and incentivising EV manufacturers. These incentives create an attractive environment for investment in the sector, particularly by establishing policies for infrastructure development, such as strategically placing charging stations across Pakistan. Given the gap in the two and three-wheeler EV market, investing in this sector could prove to be highly lucrative for investors.