Proposed tax cuts for plug-in hybrid electric vehicles (PHEVs) could reduce Pakistan’s government revenue by around Rs230 billion over five years, according to an estimate published by The Boardroom on October 6, 2026. The estimate is based on expected sales of 150,000 new energy vehicles and their current prices and tax rates.
The proposal under discussion would reduce the general sales tax on PHEVs from 18% to 9%. It would also exempt these vehicles from federal excise duty and capital value tax. At the same time, the proposed sales tax on range-extended electric vehicles (REEVs) would rise from 1% to 6%, which could bring additional money into the national treasury.
PHEVs use both an electric motor and a fuel-powered engine. Their batteries can be charged externally, allowing drivers to travel on electricity for some journeys and use fuel for longer trips.
The debate comes as Pakistan considers changes to its automotive tax policy for 2026 to 2031. The government is reviewing how taxes should apply to electric, hybrid and conventional vehicles.
Lower taxes could make PHEVs more affordable and encourage buyers to choose vehicles that use less fuel. However, the estimated revenue loss highlights the challenge of supporting cleaner transport while protecting government income.
