Proposed end of EV tax incentives and higher levies on hybrids raise concerns over market slowdown
Pakistan’s push toward cleaner transport could face a setback as the government considers ending tax concessions on electric vehicles in the Budget 2026-27, potentially raising costs for consumers and slowing industry growth, according to sources.
Under the proposal, sales tax on electric vehicles may be increased from the current concessional rate of 1% to the standard rate of 18%, significantly raising the cost of ownership for prospective buyers.
The move is part of broader revenue-raising measures under consideration ahead of the federal budget, sources said. However, industry stakeholders warn the change could undermine investment and stall momentum in the country’s emerging EV sector.
Electric vehicles, which fall under the broader category of Electric Vehicle adoption in Pakistan, have gained traction in recent years amid rising fuel prices and growing interest in lower-cost mobility alternatives.
A sharp increase in taxation is expected to raise vehicle prices significantly, making EVs less affordable for middle-income consumers who have increasingly viewed them as a viable alternative to conventional fuel-powered cars.
Industry sources say both local and international firms have invested in Pakistan’s EV ecosystem, encouraged by earlier government incentives aimed at reducing carbon emissions and dependence on imported petroleum.
Pakistan spends billions of dollars annually on fuel imports, with the transport sector accounting for a major share of consumption. Policymakers have previously viewed EV adoption as a long-term strategy to ease pressure on foreign exchange reserves.
Demand for electric vehicles has reportedly risen in recent months as elevated fuel prices pushed consumers to explore alternative transport options.
In a related development, the government is also considering increasing the sales tax on hybrid vehicles from 8.5% to 18% as part of the same fiscal package.
If implemented, the proposed changes could significantly reshape Pakistan’s automotive market and slow the transition toward cleaner transportation technologies.
Neither the finance ministry nor relevant officials have publicly commented on the proposed measures.
