• Framework places both plug-in hybrids and combustion engines in 1pc sales tax category with e-vehicles
• Stakeholders say move will distort industry, discourage sale of e-vehicles, localisation efforts
THE New Energy Vehicle (NEV) policy, designed to accelerate the transition towards cleaner electric mobility and reduce oil dependence, is facing criticism over a fundamental policy contradiction: the decision to place plug-in hybrid electric vehicles (PHEVs) in the same preferential incentive category as battery electric vehicles (BEVs).
The controversy centres on the draft policy’s proposal to extend major fiscal concessions, including a proposed one per cent sales tax and lower import duties, to both fully electric vehicles and plug-in hybrids, even though the PHEVs mostly rely on internal combustion engines.
The move risks undermining the core objectives of the policy, i.e. reducing emissions and oil imports, promoting transport electrification, and developing a localised EV ecosystem. Engineering Development Board chief executive officer Hamad Mansoor did not take calls or respond to the messages for his point of view.
The contradiction becomes sharper because the draft policy itself adopts different standards for different categories. For two- and three-wheelers, only fully battery-electric vehicles qualify for NEV incentives. However, in the passenger vehicle and commercial categories, the framework broadens eligibility to include PHEVs offering an electric-only driving range of 50 kilometres.
Critics argue that the push to include PHEVs within the NEV category is being driven by existing industry players that already benefited from earlier greenfield incentives for hybrid and plug-in hybrid assembly.
They said this policy created a regulatory double standard. If battery-only propulsion is considered necessary for motorcycles and rickshaws to qualify as “new energy vehicles”, then why should larger passenger vehicles that carry combustion engines receive the same zero-emission incentives, they asked.
According to Aamir Allahawala, a senior industry representative, the distinction between the technologies is not semantic but fundamental. “BEVs are zero-emission…should be encouraged. However, PHEVs…are not zero-emission; they are a combination of an engine and a battery.”
He said the proposed tax structure could distort the market. “The government is planning to offer incentives by grouping both under the NEV category… This means a parts manufacturer, who currently pays 18pc tax, will also be expected to pay 1pc… Although it has been proposed, the IMF is unlikely to agree. Furthermore, parts manufacturers are paying 18pc on their raw material imports, making localisation unfeasible.”
“Our viewpoint is that only BEVs should have a 1pc sales tax; we can live with it. However, PHEVs should have an 8pc to 9pc sales tax, even if not 18pc; but certainly not 1pc.”
The draft policy comes at a time when Pakistan is attempting to build an entirely new electric mobility ecosystem. The framework targets EVs accounting for 50pc of all new sales in the two- and three-wheeler and bus categories by 2030, while electric four-wheelers and trucks are projected to constitute 30pc of new sales. By 2040, the policy envisions EVs making up 90pc of all new vehicle sales, with a fully zero-emission fleet targeted by 2060.
To support this transition, the policy proposes a nationwide charging network of 3,000 stations by 2030, including battery-swapping stations. The policy also frames electrification as an energy-security imperative to reduce oil imports.
However, critics say these goals become harder to achieve if fiscal incentives blur the distinction between genuine zero-emission vehicles and transitional technologies.
“While a distinction is maintained between BEVs and plug-ins across the world, including China, we are moving in the opposite direction,” a senior executive of a Japanese automobile company operating in Pakistan warned.
“If that happens, plug-in hybrids will become much cheaper than both electric vehicles and conventional petrol cars — we are looking at a price gap of Rs1m to Rs2m — and our investments would effectively be undermined,” he says while talking about proposed concessions to PHEVs.
“Consumers will naturally shift towards PHEVs if they become the cheapest option. In that case, neither BEVs nor petrol-driven vehicles will remain competitive,” he added. “Policymakers must clearly differentiate between technologies. ‘Pure’ electric vehicles are one category, plug-in hybrids another, and conventional hybrids a third.”
Globally, regulators increasingly treat PHEVs as transitional technology. Across Europe, governments have scaled back or eliminated subsidies for plug-in hybrids after studies showed that real-world emissions frequently exceeded official laboratory claims due to inconsistent charging behaviour and continued reliance on petrol engines.
India has adopted a particularly strict approach. While battery electric vehicles enjoy a sharply reduced 5pc sales tax rate, plug-in hybrids receive no special concessions. China also limits incentives, while Thailand links fiscal concessions to both emissions performance and minimum electric-only range thresholds.
Industry stakeholders fear Pakistan may instead create a system that favours imported plug-in hybrid kits over domestic manufacturing and localisation.
“What’s happening globally is important to understand,”Allahawala argued. “In China, there’s a price war in the electric vehicle industry, leading to dumping. But we are opening our market, inviting assembly without requiring localisation. PHEVs will become cheaper than ICE vehicles…due to government benefits, and destroy demand for both BEVs and petrol-driven cars.”
“First, the influx of PHEV vehicles without local content will pressure foreign exchange; second, the large sales tax exemption will result in significant revenue loss for the FBR; and third, it will devastate the vendor industry,”Allahawala said.
The concern is shared widely among local vendors, many of whom have invested heavily over decades in Pakistan’s automotive supply chain.
“If PHEVs actually become cheaper than petrol-driven vehicles, our 500 auto parts manufacturers will face total demand destruction. This represents billions in wasted investments and risks wiping out thousands of highly skilled industrial jobs,” according to one vendor representative.
The Japanese auto executive also questioned the financing structure of the transition itself. “They imposed a ‘New Energy Vehicle’ tax on us, and they’ve collected billions of rupees from it. And they are using that tax to facilitate PHEVs,” he said. “You’re taxing one and facilitating the other.”
At the centre of the debate lies a larger question: whether future automotive strategy should prioritise rapid electrification built on genuine zero-emission mobility, or whether it should create a broad subsidy regime delaying that transition while disrupting the existing auto industry ecosystem.
Published in Dawn, May 21st, 2026
from Dawn - Home https://ift.tt/kHhfGp6
• Framework places both plug-in hybrids and combustion engines in 1pc sales tax category with e-vehicles
• Stakeholders say move will distort industry, discourage sale of e-vehicles, localisation efforts
THE New Energy Vehicle (NEV) policy, designed to accelerate the transition towards cleaner electric mobility and reduce oil dependence, is facing criticism over a fundamental policy contradiction: the decision to place plug-in hybrid electric vehicles (PHEVs) in the same preferential incentive category as battery electric vehicles (BEVs).
The controversy centres on the draft policy’s proposal to extend major fiscal concessions, including a proposed one per cent sales tax and lower import duties, to both fully electric vehicles and plug-in hybrids, even though the PHEVs mostly rely on internal combustion engines.
The move risks undermining the core objectives of the policy, i.e. reducing emissions and oil imports, promoting transport electrification, and developing a localised EV ecosystem. Engineering Development Board chief executive officer Hamad Mansoor did not take calls or respond to the messages for his point of view.
The contradiction becomes sharper because the draft policy itself adopts different standards for different categories. For two- and three-wheelers, only fully battery-electric vehicles qualify for NEV incentives. However, in the passenger vehicle and commercial categories, the framework broadens eligibility to include PHEVs offering an electric-only driving range of 50 kilometres.
Critics argue that the push to include PHEVs within the NEV category is being driven by existing industry players that already benefited from earlier greenfield incentives for hybrid and plug-in hybrid assembly.
They said this policy created a regulatory double standard. If battery-only propulsion is considered necessary for motorcycles and rickshaws to qualify as “new energy vehicles”, then why should larger passenger vehicles that carry combustion engines receive the same zero-emission incentives, they asked.
According to Aamir Allahawala, a senior industry representative, the distinction between the technologies is not semantic but fundamental. “BEVs are zero-emission…should be encouraged. However, PHEVs…are not zero-emission; they are a combination of an engine and a battery.”
He said the proposed tax structure could distort the market. “The government is planning to offer incentives by grouping both under the NEV category… This means a parts manufacturer, who currently pays 18pc tax, will also be expected to pay 1pc… Although it has been proposed, the IMF is unlikely to agree. Furthermore, parts manufacturers are paying 18pc on their raw material imports, making localisation unfeasible.”
“Our viewpoint is that only BEVs should have a 1pc sales tax; we can live with it. However, PHEVs should have an 8pc to 9pc sales tax, even if not 18pc; but certainly not 1pc.”
The draft policy comes at a time when Pakistan is attempting to build an entirely new electric mobility ecosystem. The framework targets EVs accounting for 50pc of all new sales in the two- and three-wheeler and bus categories by 2030, while electric four-wheelers and trucks are projected to constitute 30pc of new sales. By 2040, the policy envisions EVs making up 90pc of all new vehicle sales, with a fully zero-emission fleet targeted by 2060.
To support this transition, the policy proposes a nationwide charging network of 3,000 stations by 2030, including battery-swapping stations. The policy also frames electrification as an energy-security imperative to reduce oil imports.
However, critics say these goals become harder to achieve if fiscal incentives blur the distinction between genuine zero-emission vehicles and transitional technologies.
“While a distinction is maintained between BEVs and plug-ins across the world, including China, we are moving in the opposite direction,” a senior executive of a Japanese automobile company operating in Pakistan warned.
“If that happens, plug-in hybrids will become much cheaper than both electric vehicles and conventional petrol cars — we are looking at a price gap of Rs1m to Rs2m — and our investments would effectively be undermined,” he says while talking about proposed concessions to PHEVs.
“Consumers will naturally shift towards PHEVs if they become the cheapest option. In that case, neither BEVs nor petrol-driven vehicles will remain competitive,” he added. “Policymakers must clearly differentiate between technologies. ‘Pure’ electric vehicles are one category, plug-in hybrids another, and conventional hybrids a third.”
Globally, regulators increasingly treat PHEVs as transitional technology. Across Europe, governments have scaled back or eliminated subsidies for plug-in hybrids after studies showed that real-world emissions frequently exceeded official laboratory claims due to inconsistent charging behaviour and continued reliance on petrol engines.
India has adopted a particularly strict approach. While battery electric vehicles enjoy a sharply reduced 5pc sales tax rate, plug-in hybrids receive no special concessions. China also limits incentives, while Thailand links fiscal concessions to both emissions performance and minimum electric-only range thresholds.
Industry stakeholders fear Pakistan may instead create a system that favours imported plug-in hybrid kits over domestic manufacturing and localisation.
“What’s happening globally is important to understand,”Allahawala argued. “In China, there’s a price war in the electric vehicle industry, leading to dumping. But we are opening our market, inviting assembly without requiring localisation. PHEVs will become cheaper than ICE vehicles…due to government benefits, and destroy demand for both BEVs and petrol-driven cars.”
“First, the influx of PHEV vehicles without local content will pressure foreign exchange; second, the large sales tax exemption will result in significant revenue loss for the FBR; and third, it will devastate the vendor industry,”Allahawala said.
The concern is shared widely among local vendors, many of whom have invested heavily over decades in Pakistan’s automotive supply chain.
“If PHEVs actually become cheaper than petrol-driven vehicles, our 500 auto parts manufacturers will face total demand destruction. This represents billions in wasted investments and risks wiping out thousands of highly skilled industrial jobs,” according to one vendor representative.
The Japanese auto executive also questioned the financing structure of the transition itself. “They imposed a ‘New Energy Vehicle’ tax on us, and they’ve collected billions of rupees from it. And they are using that tax to facilitate PHEVs,” he said. “You’re taxing one and facilitating the other.”
At the centre of the debate lies a larger question: whether future automotive strategy should prioritise rapid electrification built on genuine zero-emission mobility, or whether it should create a broad subsidy regime delaying that transition while disrupting the existing auto industry ecosystem.
Published in Dawn, May 21st, 2026
0 Comments