The State Bank of Pakistan (SBP) has highlighted significant funding, infrastructure and implementation challenges facing Pakistan’s New Energy Vehicles (NEV) Policy 2025–30, cautioning that the success of the country’s transition towards electric mobility will depend on establishing a sustainable financing mechanism and ensuring coordinated execution across relevant institutions. The assessment was presented in SBP’s Half Year Economic Report, which identifies the shift towards electric vehicles (EVs) as an important structural change for Pakistan’s transport and energy landscape.
The NEV transition carries significance for both environmental and economic reasons. The transport sector accounts for nearly 10% of Pakistan’s national carbon output, while the country faces an average annual oil import bill of around $15.8 billion. SBP noted that reducing dependence on imported oil through greater adoption of electric vehicles could help address these pressures. Against the backdrop of continuing volatility in the Middle East, the central bank also stressed that faster EV adoption could provide a buffer against future oil import shocks and reduce the economy’s exposure to fluctuations in international energy markets.
Pakistan’s current NEV framework builds on stakeholder consultations as well as the experience of the country’s 2019 EV policy, which encountered significant implementation bottlenecks, particularly during the disruptions caused by the COVID-19 pandemic. The new policy seeks to address some of those shortcomings by coordinating measures around four key areas: vehicle affordability through pricing measures, deployment of charging infrastructure, incentives aimed at encouraging consumer demand and greater institutional coordination.
Some progress has already been recorded in local electric vehicle production. Electric car production increased from 110 units in the first half of FY25 to 137 units in H1-FY26, representing growth of 24.5%. Sales also increased from 104 units to 139 units during the same period, showing a 33.7% increase. Although the numbers remain small compared with conventional vehicle production and sales, the increase indicates that localized EV assembly is beginning to gain traction in Pakistan.
The broader automobile sector also recorded significant changes during the period. Car production increased 56.2% year-on-year from 47,880 units in H1-FY25 to 74,782 units in H1-FY26, while car sales increased 41.8% from 46,398 units to 65,771 units. Production of vehicles with engine capacity of 1,300cc and above rose 73.4% to 36,716 units, while sales increased 72.8% to 35,404 units. Vehicles below 1,000cc recorded production growth of 47.8% to 35,861 units, with sales increasing 17.9% to 27,846 units.
Jeeps and pickups also recorded strong growth, with production rising 36.9% to 21,386 units and sales increasing 58.1% to 22,412 units. Trucks and buses posted production growth of 89.4% to 3,856 units, while sales increased 96.4% to 3,532 units. In contrast, tractor production declined 19.6% to 13,366 units, while sales fell 25.7% to 12,929 units. Two- and three-wheeler production increased 32.9% to 928,521 units, while sales rose 32.3% to 921,566 units.
Despite the progress, SBP has identified the financing structure of the NEV policy as one of its major vulnerabilities. The policy proposes a Rs122 billion feebate funding mechanism that depends on demand for conventional automobiles. The mechanism is financed through levies ranging from 1% to 3% of the invoice price of conventional internal combustion engine (ICE) vehicles.
SBP warned that this funding structure could face difficulties if conventional vehicle sales experience a structural decline. A sustained reduction in sales of ICE vehicles could reduce the funds available for EV subsidies and charging infrastructure, potentially affecting the continuity of the programme. This creates a challenge because the policy seeks to gradually move consumers away from conventional vehicles while simultaneously relying on their sales to finance elements of the transition.
The central bank compared Pakistan’s approach with international examples where EV incentives have relied on other funding mechanisms. India, for instance, has used upfront subsidies ranging from 20% to 40% of the ex-factory price for eligible vehicles, while Malaysia has introduced individual tax rebates of RM2,400. According to the SBP assessment, these models provide comparatively more stable avenues for supporting electric mobility than a financing mechanism dependent on levies collected from conventional vehicle sales.
Charging infrastructure represents another major obstacle to wider EV adoption. SBP noted that low initial EV adoption is limiting the expected commercial returns from charging stations, which in turn reduces incentives for private-sector investment in charging networks. Without sufficient charging infrastructure, consumers may remain reluctant to purchase EVs, creating a cycle in which low demand discourages infrastructure investment and limited infrastructure restricts demand.
To address this challenge, SBP has recommended state-led deployment of charging stations in targeted urban centres. The approach would allow the government to help establish an initial charging network in areas where commercial investment may not yet be attractive. SBP pointed to initiatives in countries such as Indonesia and Brazil as examples of state-supported charger deployment that could help build confidence among private investors.
The central bank also highlighted the need to expand the scope of vehicle categories covered by the transition. Pakistan’s current manufacturing localisation efforts are largely concentrated on two- and three-wheelers, which account for a substantial portion of the country’s vehicle production. However, SBP noted that China’s experience indicates the importance of gradually expanding EV coverage to heavier vehicles if the country is to achieve a more substantial environmental impact.
Institutional coordination will also play an important role in determining the effectiveness of the NEV policy. The proposed National Energy Vehicles Centre (NEVC) is expected to provide a mechanism for coordinating policy implementation, reducing regulatory overlaps and improving technical capacity. SBP has indicated that stronger institutional coordination will be necessary to address implementation gaps and ensure that the various elements of the policy move forward in a coordinated manner.
The NEV transition therefore presents Pakistan with both an opportunity and a set of implementation challenges. While rising electric car production and sales indicate early progress in local EV adoption, SBP’s assessment suggests that long-term growth will require reliable financing, wider charging infrastructure, stronger institutional coordination and broader vehicle coverage.
The central bank’s assessment also underlines the connection between EV adoption, energy security, industrial development and environmental objectives. Reducing reliance on imported fuel could provide economic benefits, while greater localisation of EV manufacturing could create opportunities for domestic industry. However, achieving these outcomes will depend on addressing the funding and infrastructure constraints identified in the report and ensuring that the policy is implemented through coordinated measures.
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