Auto policy to make hybrid cars expensive in Pakistan?

ISLAMABAD: Hybrid vehicles assembled in Pakistan are expected to become significantly more expensive after the government increased the sales tax on them from 8.5 percent to 18 percent, a measure that came into effect with the start of the new fiscal year on 1 July 2026.

The revised tax rates will apply to hybrid and plug-in hybrid vehicles.

Meanwhile, sales tax on all imported and locally assembled plug-in hybrid vehicles has been raised sharply from 1 percent to 18 percent.

The change follows the implementation of the Finance Bill, which also abolished Pakistan’s five-year automotive policy.

Until a new auto policy is introduced, the revised tax rates will apply to hybrid and plug-in hybrid vehicles.

It was also made clear in the Finance Bill documents that the increase is a temporary measure that will remain in force until the government announces and implements a new automotive policy.

The tax structure is expected to be reviewed once the new policy takes effect.

Auto sector experts say the higher tax rates will affect both local manufacturers and vehicle importers, leading to an immediate increase in the prices of hybrid and plug-in hybrid vehicles by hundreds of thousands of rupees.

They also caution that the higher prices could temporarily reduce consumer demand for hybrid vehicles.