Pakistan’s automotive sector could see another major policy shift as the federal government reportedly weighs new taxation measures for electric vehicles (EVs) in the upcoming fiscal year 2026-27. According to media reports, authorities are considering imposing a sales tax of up to 25% on imported electric vehicles, while maintaining existing tax incentives for locally manufactured hybrid vehicles.
The proposed changes come as several tax concessions currently available to the EV industry are set to expire on June 30, 2026. These incentives were introduced to encourage the adoption of cleaner transportation technologies and support the development of a domestic electric vehicle ecosystem.
Imported EVs May Face Higher Tax Burden
One of the most notable proposals under consideration is the introduction of a significantly higher sales tax on imported electric vehicles. If approved, the move could increase the cost of imported EVs for consumers and potentially slow the growth of the import-driven electric vehicle market.
The government appears to be focusing on promoting local manufacturing rather than relying on imported vehicles. Higher taxes on imported EVs could encourage automakers and investors to expand local assembly and production operations within the country.
Future of Tax Incentives for Local EVs
Currently, locally assembled and manufactured four-wheel electric vehicles enjoy a reduced sales tax rate of just 1%. This concession applies to small passenger vehicles, SUVs, and light commercial vehicles that meet specified battery capacity requirements.
However, this reduced rate is scheduled to expire at the end of the current fiscal year. While reports indicate that imported EVs may face increased taxation, the government has not yet clarified what sales tax rate will apply to locally assembled EVs after June 30, 2026.
Industry stakeholders are closely monitoring the upcoming federal budget for further details.
Relief Expected for Hybrid Vehicles
In contrast to the proposed changes for imported EVs, locally produced hybrid electric vehicles are expected to retain their current preferential tax treatment. Hybrid models currently benefit from reduced sales tax rates ranging between 8.5% and 12.75%.
Maintaining these concessions could help sustain consumer demand for hybrid vehicles, which continue to serve as a practical alternative for buyers concerned about charging infrastructure and vehicle affordability.
Supporting Local Manufacturing Through Customs Incentives
Alongside the sales tax proposals, lawmakers have also moved forward with customs-related amendments designed to support the automotive industry.
The Senate Standing Committee on Finance recently approved the Customs (Amendment) Bill, 2026, which aims to align existing electric vehicle incentives with the Automotive Industry Development and Export Policy 2021-26.
The proposed amendments extend concessional customs duties on EV-specific parts and components until June 30, 2026. These incentives are intended to lower production costs for manufacturers and encourage greater localization of electric vehicle production.
The concessions cover a broad range of electric mobility segments, including two-wheelers, three-wheelers, passenger vehicles, commercial vans, buses, trucks, and other heavy commercial vehicles.
Encouraging Industry Growth
Pakistan first introduced its Electric Vehicle Policy in 2020 to accelerate the adoption of environmentally friendly transportation and reduce dependence on imported fuel. Since then, the government has offered various tax and customs incentives to support both manufacturers and consumers.
The latest proposals suggest that policymakers are seeking a balance between encouraging electric mobility and strengthening local industrial capacity. By maintaining support for domestic manufacturers while increasing taxes on imports, the government aims to create a more sustainable and self-reliant automotive sector.
Awaiting Final Budget Announcement
While discussions are ongoing, no final decision has been announced. The proposed measures will ultimately be included in the Finance Bill and will require federal government approval before taking effect.
Until the official budget is unveiled, consumers, manufacturers, and investors will be watching closely to see how Pakistan’s electric vehicle policy evolves and what impact it may have on the country’s transition toward cleaner transportation.