Pakistan’s hybrid and plug-in hybrid vehicle (PHEV) market has slowed significantly following the expiry of the Auto Industry Development and Export Policy 2021–2026, leaving buyers, automakers, and dealers waiting for the government’s new policy framework.
The previous auto policy expired on June 30, after which the sales tax on hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs) increased from 8.5% to 25%. However, the government has yet to announce the Auto Policy 2026–2031, creating uncertainty across the automotive industry.
According to industry sources, disagreements over an early draft of the new policy—particularly proposals aimed at accelerating electric vehicle adoption—have delayed its approval. As a result, several vehicle assemblers have reportedly suspended invoicing and deliveries of hybrid models until a final decision is made.
Hybrid Vehicle Production Halted as Sales Tax Uncertainty Hits Auto Industry
The government is said to be considering a proposal that would reduce the sales tax on hybrid vehicles to 18%, but the existing 25% tax rate will remain in force until the federal cabinet formally approves the changes.
Industry representatives warn that the prolonged delay has disrupted the market, leaving vehicles unsold, buyers postponing purchases, and manufacturers facing uncertainty. They also noted that the government is missing out on potential tax revenue due to stalled sales.
Automakers and consumers are now looking to the government for a timely announcement of the new auto policy to restore confidence, stabilize the market, and support the future growth of Pakistan’s automotive sector.
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