By Mohammad Bilal
Pakistan hopes to increase electric vehicle adoption with its new policy, but a deep dependency on fossil fuels stands in the way, experts say.
Pakistan imports billions of dollars’ worth of oil annually. This has not only kept its foreign reserves under pressure, but also entrenched inflation and worsened urban pollution.
As the country navigates an energy and environmental crisis, experts and activists are asking: can Pakistan switch gears from polluting vehicles to electric vehicles (EVs) and embrace a cleaner and more sustainable future?
The country has set ambitious goals with its New Energy Vehicle Policy 2025-30 launched in June to replace the original of 2019. It wants 30% of all new vehicle sales to be electric by 2030, and by 2050, all new vehicles.
Though encouraging on paper, these goals are being held back by policy inconsistency, inadequate EV infrastructure and a slow-moving industrial base. Taking the steps to achieve them in a country structurally dependent on fossil fuels will not be easy.
Pakistan’s deep relationship with petrol
The transport sector accounted for 80% of Pakistan’s total petroleum consumption in 2024-25, up by 8% on the previous year. The country also imported USD 15.9 billion worth of petroleum products, according to data from the Pakistan Bureau of Statistics. This dependence feeds a vicious cycle of trade deficits, currency and inflationary pressure.
But the country’s reliance on fossil fuels also underpins government revenue. The Petroleum Development Levy (PDL), which acts as a consumption tax on fuel, is expected to bring in PKR 1.47 trillion (USD 5 billion) in fiscal year 2025-2026 – a sharp rise from PKR 1.16 trillion the previous year.
This comes after the government removed all restrictions on where it can set the levy, which was previously capped at PKR 70. The new budget has also introduced a carbon levy of PKR 2.5 per litre, which is expected to double next year. These levies were introduced as part of a funding agreement with the International Monetary Fund (IMF).
While positioned as a climate action tool, the carbon levy is also a small money maker, anticipated to add PKR 45 billion to annual revenues in the next fiscal year, equivalent to 0.3% of the total tax revenue of PKR 14.131 trillion. Combined with the PDL, this makes 10.72%. Transitioning to electric mobility will therefore directly impact the government’s fiscal machinery.
Additionally, “the absence of earmarked spending or compensatory schemes makes the levy appear more like a budget-balancing act than a climate response”, noted Saad Ali Ahmed, research assistant at Islamabad-based non-profit, Sustainable Development Policy Institute (SDPI), in The News. He added that “the term ‘carbon levy’ also suggests a climate-focused policy tool, but there is little indication of a structured plan to use the revenue for environmental or social objectives.”
The New Energy Vehicle Policy
In the power sector, Pakistan’s generation capacity far exceeds current consumption, offering an incentive for greater adoption of EVs. The country’s installed electricity generation capacity was 46.6 GW in fiscal year 2024-2025. Yet in June 2025, actual production stood at just 41% of that, at 13,744 GWh (19.1 GW).
Danish Khaliq, vice president of sales and strategy at BYD Pakistan, says, “this inefficiency is “glaring.” EVs could absorb this surplus power and improve grid utilisation, he notes.
The NEV Policy 2025-30 could address the issue. In total, the policy is expected to reduce annual fuel use by just over 2 billion litres. It includes over PKR 100 billion in subsidies over the policy period and provides significant reductions in electricity tariffs for charging infrastructure – a move that began earlier this year with a 45% tariff relief approved for EV charging stations.
The policy envisions the addition of 40 charging stations every 105 kilometres along highways, and eventually establishing 3,000 nationwide by 2030. A partnership between BYD, the world’s largest electric car maker, and power producer HUBCO Green aims to add 128 fast-charging stations nationwide, with the first 50 expected to be operational by the end of 2025. Chinese firm ADM Group has pledged USD 350 million to develop over 3,000 charging stations and a USD 250 million local EV plant. Early entrants, BMW and Shell Pakistan/K-Electric have already installed chargers.
As part of the policy, localisation of EV manufacturing will be promoted, especially for two- and three-wheelers, which make up over 85% of Pakistan’s vehicle fleet. Haroon Akhtar Khan, special assistant to the prime minister on industries and production, said that the country is providing incentives to manufacturers to encourage localisation, and over 90% is expected to be achieved for electric two- and three-wheelers within three years.
Local EV manufacturing and adoption
China’s dominance in EV manufacturing has positioned it at the centre of Pakistan’s green transport transition. The 2024 arrival of BYD in the country was viewed as a significant breakthrough. Partnering with a subsidiary of Hubco, Mega Motor Company, BYD announced plans for a USD 200 million local assembly plant in Karachi to be completed in 2026, aiming to roll out thousands of vehicles as well as a network of fast chargers.
EV adoption in Pakistan hasn’t been limited to personal transport, though. Heavy-duty electric mining trucks are on the road in Thar and Balochistan’s coal-rich belts. Public transport is also beginning to gain traction: the World Bank has approved a USD 300 million loan to help Punjab replace diesel buses with electric ones, starting in cities like Lahore.
Yet local manufacturing progress on EVs so far has been modest. Roughly 40,000 to 45,000 electric bikes and only a few hundred electric cars were produced in 2024-25, according to a government official familiar with the data, who requested anonymity. The official noted that while over 60 companies have received licences to manufacture EVs, many have yet to begin production.
The country also depended on fossil fuels for 53% of its electricity in 2024.
The IMF, which gave Pakistan a USD 7 billion loan in 2024, opposed sales tax concessions for locally sold EV parts and said that no future concessions should be introduced, reportedly arguing that they would affect revenue generation and fiscal discipline. Reversals in renewable-energy policies – like cuts to solar net metering rates – are also likely to shake investor confidence.
Additionally, despite strides towards wider adoption of EVs with its NEV Policy, Pakistan is still actively investing in its fossil fuel infrastructure and oil and gas resources.
The country has a USD 1.2 billion financing facility with the Saudi Fund for Development in place, allowing for the import of oil from Saudi Arabia on deferred payment for a year. Islamabad also has long-term LNG import contracts with QatarEnergy, a 3 million tonne annual supply 10-year contract with Qatar Petroleum, and signed a 14-year contract with Italy’s Eni in 2017.
Looking ahead
Though there is a belief that elements of the NEV Policy will produce results, experts say that for EVs to truly break fossil fuel dependency, more needs to be done to increase adoption, primarily by reducing costs and changing perceptions.
In 2024, Pakistan’s Urban Unit, a policy advice organisation, noted in its report outlining policy recommendations for EV adoption that such vehicles are on average 20-30% more expensive than petroleum-based competitors, and are “way above the affordability limits of a low-income household”.
Khalid Waleed, a research fellow at the SDPI with over a decade of experience in Pakistan’s energy sector, emphasised the importance of retrofitting schemes, such as those that install EV capabilities on old motorbikes at low cost. “We’ve seen promising models where banks accept old bikes as collateral and offer retrofitting for around PKR 100,000 (USD 352). Such initiatives can significantly accelerate adoption.”
He also expressed hope that the new IMF funding of USD 1.3 billion under its Resilience and Sustainability Facility (RSF) could help, as it includes a focus on building charging infrastructure through public-private partnerships.
Waleed said that ultimately, the solution to the issue of EV affordability in Pakistan might lie in China’s supply. “China, facing overcapacity, may flood Pakistan with affordable EVs just as it did with solar panels.”
But he said there should be a focus on local manufacturing, discouraging the import of completely built-up EVs, and said more automakers like BYD should be encouraged to relocate production to Pakistan.
Waleed continued: “To truly benefit, we must also upskill our local auto industry workforce,” adding that Pakistan must develop a local EV supply chain – from battery storage to assembly lines. The increase in employment across Pakistan’s EV sector could lead to its growth and development, bringing with it higher rates of adoption.
But a lack of trust in the durability and longevity of EVs remains, especially for two- and three-wheelers and their batteries and maintenance, the Urban Unit report noted. It stated that this could be overcome by launching campaigns depicting the benefits of these EVs and long-term durability to change popular opinion.
There is a high environmental and health cost to maintaining the status quo. Air pollution in major cities like Karachi and Lahore has reached dangerous levels. According to IQAir, Pakistan ranked third in the world for the highest level of air pollution, with Lahore among the top 15 cities.
While Karachi’s PM2.5 readings decreased from 2023 levels to 46 micrograms per cubic metre (µg/m3), this is still over nine times the WHO’s recommendation of 5µg/m3. According to a report by the Pakistan Air Quality Initiative seen by Dialogue Earth, in both cities, the transport sector is the biggest creator of PM2.5 pollution in Lahore, at 35%, whilst it is second in Karachi at 33%.
Yasir Husain, founder of the Climate Action Centre and Green Pakistan Coalition, notes that road traffic pollution disproportionately harms the vulnerable.
“Children, the elderly, traffic police, roadside vendors, and drivers without air-conditioned vehicles are all forced to inhale toxic fumes,” he said. “It’s not just about PM2.5. Combustion vehicles release nitrogen oxides (NOx) and sulphur oxides (SOx), which contribute to smog, respiratory diseases, and even cardiovascular issues. Replacing [conventional cars] with EVs is not just a climate solution – it’s a public health necessity.”
Pakistan stands at a crossroads. One path leads to continued fossil fuel dependence – with high import bills, environmental degradation and energy insecurity. The other offers a future powered by electric mobility, with cleaner cities, lower trade deficits and new economic opportunities.
As Waleed characterised it: “With falling prices, increased competition, and deregulation, Pakistan is on the brink of an EV revolution.”
First published in Dialogue Earth.
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