Budget 2025-26: Pakistan’s auto industry seeks clarifications about EVs, hybrid cars

KARACHI: The automotive industry is seeking urgent clarification on recent measures proposed in the federal budget 2025-26 that could significantly impact the electric and hybrid vehicle markets, as conflicting tax rates threaten billions of dollars investments.

Speaking to a group of journalists, Syed Asif Ahmed, General Manager of MG Motors Pakistan, highlighted a critical tax disparity that has persisted for years. Hybrid Electric Vehicles (HEVs) currently enjoy a preferential 8.5% GST rate, whereas Fully Electric Vehicles (EVs) face an 18% GST burden.

“This anomaly has existed for many years, giving an unfair advantage to HEVs over EVs,” Ahmed said. He pointed out reports circulating on social media, suggesting the government may increase GST on HEVs from 8.5% to 18%.

Budget 2025-26: auto sector faces mixed fortunes amid tariff reforms, carbon tax

Ahmed lamented that if the GST were increased to 18%, it could imperil huge investments poured into hybrid vehicle technology, contradicting commitments made under the Automotive Industry Development and Export Policy (AIDEP) 2021-26, which promised no tariff changes until June 2026.

“The Finance Bill remains silent on this critical subject,” Ahmed said, adding that what is needed is for EV GST to be reduced to 8.5% to match the HEV rate, rather than raising taxes on hybrid vehicles.

The MG Motors executive also raised concerns about potential abuse of import regulations, claiming that used car importers are exploiting gift, baggage, and transfer of residence schemes for commercial trading purposes, circumventing normal import procedures.

He said if commercial importers were allowed to import five-year-old used cars with reduced regulatory duties, it would create more challenges for the local auto assemblers.

Copyright Business Recorder, 2025