Pakistan’s EV Policy Is Changing: What It Means for EV, REEV and HEV Owners

The government is simultaneously pushing a long-term transition towards New Energy Vehicles (NEVs), changing vehicle taxation, expanding charging infrastructure and trying to determine exactly where newer technologies such as Range-Extended Electric Vehicles (REEVs) fit into the country's tax and customs framework.

For consumers, the result is a market where the technology inside a vehicle can have a major impact on how much tax it attracts. The most important point is that Pakistan's transition is no longer simply about petrol versus electric. The market now includes battery-electric vehicles (BEVs), conventional hybrids (HEVs), plug-in hybrids (PHEVs) and REEVs, and the government is increasingly treating each technology differently.

Pakistan's 2030 NEV Target

The government's New Energy Vehicle Policy 2025–30 sets an ambitious target: NEVs should account for 30% of new vehicle sales by 2030, across every segment from motorcycles and rickshaws to cars, buses and trucks. Beyond that, the policy sets an ambition of 50% of new vehicle sales by 2040 and 100% by 2050, and a zero-emission vehicle fleet by 2060.

The policy is broader than simply encouraging fully electric cars. For cars and other four-wheelers, as well as buses, vans, light commercial vehicles and trucks, a plug-in hybrid also counts as an NEV if it can drive at least 50 kilometres on electricity alone on a single charge. For motorcycles and rickshaws, only fully electric ones count.

This distinction is important because it shows where policymakers appear to be heading: encouraging vehicles that can actually run on electricity for a meaningful distance, rather than giving identical treatment to every vehicle labelled "hybrid". However, the policy framework and the tax system do not always move at the same speed.

EV Owners: Incentives Remain, but the Market Is Getting More Complicated

For locally made electric vehicles, the Finance Act 2026 kept the 1% sales tax and extended it to 30 June 2027, together with the sales tax exemption on kits imported for local assembly and the exemption from Federal Excise Duty, as FBR's circular on the Act sets out. The government also extended the 25% customs duty concession for imported, fully built four-wheel EVs priced below US$50,000 to the same date. The government has not abandoned EV incentives.

In fact, the current approach is increasingly selective. Mass-market EVs continue to receive significant support, while very expensive imported electric cars are being treated differently. Electric cars had been excluded from Federal Excise Duty, but the Finance Act 2026 now charges it on luxury EVs: 30% on those valued above US$75,000 and up to US$110,000, and 40% above US$110,000.

For an ordinary EV buyer, this means the policy environment remains relatively favourable. For someone looking at a high-end imported electric SUV or luxury EV, however, the tax advantage is considerably smaller than it used to be.

HEV Owners Have Faced the Biggest Tax Shock

Conventional hybrid vehicles are in a very different position. Until 30 June 2026, locally made hybrids paid a concessional sales tax of 8.5% up to 1,800cc and 12.75% from 1,801cc to 2,500cc, under an entry in the Sales Tax Act that carried its own expiry date. The Finance Act 2026 extended the matching concession for electric vehicles but not this one, so from 1 July locally made hybrids fell into the enhanced 25% rate that applies to locally made cars of 1,400cc and above. Several locally assembled hybrids went up in price as a result.

On 13 September, the government took part of that back. SRO 1525(I)/2026 removes locally made hybrids up to 2,000cc from the 25% band, which leaves them at the standard rate of 18%. Hybrids from 2,001cc to 2,500cc stay at 25%, and the notification doesn't say whether plug-in hybrids count.

The days when the word "hybrid" automatically meant a major tax advantage are disappearing. That could make conventional HEVs less attractive than PHEVs and EVs if the latter continue to receive stronger policy incentives.

REEVs Have Become One of Pakistan's Biggest Automotive Policy Debates

The most interesting development is arguably the treatment of Range-Extended Electric Vehicles. A REEV has an electric motor that drives the wheels, while a petrol engine acts only as a generator to produce electricity.

In late 2025, FBR asked Pakistan Customs to decide whether REEVs should be classified as plug-in hybrids or as electric vehicles. The question mattered because a vehicle's classification decides which customs duties apply to it.

The answer came in Public Notice No. 02/2026, dated 2 February 2026. The Classification Committee of the Collectorate of Customs Appraisement (East) in Karachi classified the Deepal S05 and the Forthing Friday under PCT 8703.8090, the heading for vehicles with only electric motors for propulsion. Its reasoning was that the engine in these cars never drives the wheels mechanically. It only generates electricity for the battery and the motor. The committee accepted that a REEV can be described as a kind of series hybrid, but under the current HS 2022 nomenclature it treated these two as electrically propelled vehicles.

What the Ruling Does Not Decide

There are two important caveats. First, the ruling covers only the two cars it examined, and says it is "not for general application". Second, it states that fiscal concessions, exemptions and incentives do not "fall within the functional jurisdiction of the Classification Committee".

In other words, being classified as an electric vehicle for customs purposes does not automatically mean every REEV receives every EV tax benefit. That distinction will become increasingly important as more REEVs enter Pakistan. REEVs are particularly attractive in Pakistan because they attempt to solve one of the biggest problems facing EV adoption: long-distance travel. A driver can use the vehicle primarily as an electric car around town while retaining a petrol generator for situations where charging infrastructure is unavailable.

That makes the technology particularly interesting for Pakistan's developing charging network. It also explains why other carmakers objected. According to the ruling, PAMA, Indus Motor, Sazgar and BYD's distributor Mega Motor argued that EV-specific concessions, "which are intended for vehicles without reliance on fuel, should not be extended to REEVs".

The government therefore faces a difficult question: should a vehicle be taxed according to what physically drives its wheels, or according to how much it depends on petrol? Pakistan has not resolved the broader policy question.

PHEVs Could Become the Middle Ground

PHEVs could potentially become one of the biggest winners if the proposed automotive policy changes are implemented, though how big a winner is now in question.

The proposed Auto Policy 2026–31, which the Prime Minister approved in principle on 9 September, is reported to keep a 1% sales tax on NEVs, with exemptions from Federal Excise Duty, Capital Value Tax and withholding tax. Reports disagree on plug-in hybrids and REEVs. The Express Tribune reported that the Prime Minister rejected a proposal to treat them the same as battery EVs, ordering that BEVs get the most favourable treatment, then REEVs, then PHEVs. Dawn describes equal treatment. These are proposals, not something buyers should assume applies to every PHEV or REEV. Our breakdown of the draft has the details.

For buyers, this creates an unusual situation: a PHEV or REEV purchased today could be affected by future policy decisions concerning its classification and incentives.

Pakistan Is Also Planning a Much Larger Charging Network

The NEV policy places considerable emphasis on charging infrastructure. It plans 3,000 charging stations by 2030: 1,050 Level 3 fast chargers, 750 Level 2 chargers, 600 Level 1 chargers and 600 battery-swapping stations, the last two mainly for motorcycles and rickshaws. The policy describes these numbers as indicative.

The first phase is 40 Level 3 fast-charging stations, primarily along the motorways and the N-5, to be completed within six months of the policy's approval, at an average gap of around 120 kilometres. After that, the aim is one charging station every 50 kilometres along major highways by 2030.

The government is also trying to fix the economics of running a public charger. The Power Division cut the electricity tariff for EV charging stations by 44% in January 2025, to about Rs 39.70 per unit including taxes. NEPRA's current base rate for charging stations is Rs 23.57 per kWh, and each station adds its own margin.

For stations that may not pay their way at first, the policy proposes viability gap funding. It estimates the need at about 15% of new stations each year, 450 in all, at an indicative Rs 2.25 billion over the five years, to be allocated through the federal budget.

What Does All of This Mean for Pakistani Car Buyers?

For an EV owner, the outlook is relatively positive. The government continues to support EV adoption, locally made EVs keep a 1% sales tax until June 2027, charging infrastructure is being expanded, and further incentives are being proposed.

For a REEV owner, the situation is more complicated but potentially very promising. The customs ruling treats two REEVs as electrically propelled vehicles for customs purposes, but the fiscal benefits associated with that classification remain a separate policy question.

For a PHEV owner or buyer, the future could be even more interesting. The NEV policy counts plug-in hybrids with at least 50 km of electric range as NEVs, but the draft auto policy may rank them below EVs and REEVs, so buyers should distinguish proposed incentives from benefits already in force.

For a conventional HEV owner, the outlook is less favourable from a taxation perspective. September's cut brings locally made hybrids up to 2,000cc back to the standard 18%, not to the 8.5% they paid before July, and the draft auto policy would tax hybrids like petrol cars.

So, What Could This Mean for Your Next Car Purchase?

Pakistan's automotive transition is no longer simply a race to replace petrol cars with EVs. The country is effectively building a hierarchy of electrification. If policy keeps changing faster than consumers can keep up with, however, buyers and manufacturers may continue to hesitate. For Pakistani car buyers, the most important question is: which type of electrified vehicle makes the most sense under Pakistan's rapidly changing rules?