Hybrid Vehicle Prices Rise as Rejected EV Policy Restores Previous GST Structure
The withdrawal of the proposed EV Policy means hybrid vehicles remain subject to the previous 25% GST, resulting in higher prices and delays for several upcoming launches.
The proposed EV Policy 2026 for Pakistan has been withdrawn after local auto manufacturers raised objections to the draft, prompting the government to begin work on a revised policy. Earlier this year, the Ministry of Industries and Production submitted a new auto policy draft after consultation with multiple parties involved in the industry, and its biggest change was to provide a special discount to EV and hybrid vehicles. The proposal aimed to encourage buyers to switch from conventional ICE vehicles to hybrids and EVs by reducing taxes. The move was also intended to lower Pakistan’s dependence on imported petroleum products amid growing regional geopolitical uncertainty.
The policy rejection was announced over the weekend when local manufacturers approached the Prime Minister of Pakistan and asked him to review the draft of the submitted auto policy. In return, the draft was scrapped, and a new committee has been formed that will now draft a new auto policy while keeping the reservations of local auto manufacturers in mind. According to multiple local media reports, the new policy has been dropped in the court of Deputy Prime Minister Ishaq Dar, who will prepare the draft and present it to the prime minister.
Hybrid vehicles were given an incentive in the new Auto Policy 2026-31, which reduced the GST on them to 8.5%. However, now that the new policy has not been accepted, the proposed GST reduction is no longer applicable. From July 1, 2026, the GST on HEVs and PHEVs increased back to 25%, causing an increase in their prices. For Toyota and Honda hybrid vehicles, this caused an increase of over Rs. 1.3 million for certain models. A lot of manufacturers are currently holding back on announcing prices of their new HEVs and PHEVs, due to this issue. KIA recently launched its brand new KIA Sportage and Sorento HEV and PHEV options but has not announced its final prices due to this delay.
While the revised policy is now being prepared, there is no official timeline for when it will be announced or whether the proposed tax incentives for hybrids and EVs will return in the new draft. Until then, manufacturers and buyers remain in a state of uncertainty. The uncertainty surrounding the revised Auto Policy is also affecting parts suppliers. Vehicle deliveries and invoices are suspended for an indefinite period, and the stakeholders are asking the government to introduce a policy that benefits everyone.
