Pakistan’s hybrid vehicle market has entered a period of uncertainty after the previous sales tax concession on hybrid vehicles, including HEVs and PHEVs, expired on June 30th 2026.
Under the previous concession, hybrid electric vehicles, including HEVs and PHEVs, were subject to a reduced sales tax rate of 8.5%, while models with engines above 1,800 cc were taxed at 12.75%:
With the concession now expired, the applicable sales tax has been technically reverted to the default rate of 25%.
However, the government has not formally confirmed this rate, leaving automakers confused and forcing them to stop production and invoicing.
What Is the Challenge?
The challenge is that the previous concession has expired, and the government has not announced a replacement policy.
As a result, automakers currently do not know which sales tax rate to list on invoices for their hybrid vehicles.
Under the general tax structure, vehicles with engines exceeding 1,400 cc or priced at Rs. 4 million or more are subject to a 25% sales tax.
Following that logic, all hybrid vehicles currently sold in Pakistan technically fall under the 25% tax rate.
But this remains an interpretation and not an announced government decision.
Government Says a New Auto Policy Is Delayed
The government has indicated that a new auto policy is being prepared and may introduce an 18% sales tax rate on hybrid vehicles.
The policy, however, is delayed and expected to be announced in August 2026.
No exact date has been provided as well. It could be announced at the beginning of August or near the end of the month.
Until then, manufacturers have been left without instructions on how to price their hybrid vehicles.
Hybrid Vehicles Production and Invoicing are Halted
Hybrid vehicle manufacturers have halted production since July 1 and are not issuing invoices because they do not know which GST rate to apply to customer invoices, according to manufacturers contacted by PakWheels.
As of July 14, production has been stopped for two weeks, and the number of days without production keeps rising with no end in sight.
On this topic, Sazgar’s COO, Ali Hameed, told PakWheels that each additional day increases delivery delays, disrupts production schedules and dealer operations, and creates financial pressure across the supply chain.
Similarly, auto expert Suneel Munj mentions that a production halt affects the people connected with it. Thousands of people, including vendors, transporters, and factory workers, are losing work and wages because production has stopped.
Customers Are Blaming Automakers
Customers waiting for their hybrid vehicles have taken to social media to complain about delayed deliveries.
Ali Hameed said the uncertainty is damaging manufacturers’ credibility.
Since manufacturers deal with customers directly, not the government, customers direct their frustration at the party in front of them, even though the delay originates from the policy vacuum.
The Government Had Enough Time to Prepare
The expiry date of the hybrid vehicle tax concession was not unexpected.
Suneel Munj, while criticizing the government in an episode of PakWheels Weekly, said a new policy should have been finalized before the previous concession expired.
He added that the government knew the concession would expire on June 30, 2026. The government therefore had time to prepare a replacement policy before the deadline.
Instead, the concession expired, and 14 days have passed while the replacement policy remains unfinalized.
Suneel also said the disruption in the auto sector stemmed from a delay by the government, and it could have been avoided if the policy had been announced on time.
View the specific PakWheels Weekly episode for complete details:
New Auto Policy is Coming in August
The industry is waiting for the government’s new automotive policy, which is expected in August.
The longer this situation continues, the greater the financial damage will be.
Until the policy is announced, manufacturers may continue to halt invoicing and production to avoid future tax disputes.
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