NEVs get major tax relief

According to The Express Tribune, Prime Minister Shehbaz Sharif has approved a draft five-year auto policy covering 2026 to 2031. Existing assemblers of conventional vehicles will keep protection for another four years, while new energy vehicles (NEVs) are set to receive substantial tax incentives to lower their prices. Hybrid electric and internal combustion engine vehicles will now be treated equally for duties and taxes.

At Wednesday's meeting, the premier split range extended and plug-in hybrids from battery electric models and dropped a planned federal excise duty on conventional cars below 1000 cc. Battery electric cars get the most favourable tax treatment, followed by range extended and plug-in hybrids. NEVs face only 1% sales tax, with no federal excise duty, capital value tax or withholding tax, and loan ceilings rise to Rs10 million with five-year tenors.

Customs duty on cars above 1800 cc is set at 40% for the first two years and falls to 15% by FY30-31. The Toyota Fortuner's projected price drop is 9%, or Rs2 million, by the final year, though annual increases could erode part of it. The draft now goes to the Ministry of Law for legal vetting, while the Finance Ministry will take it to the IMF. A review after two years will weigh energy costs, levies, borrowing rates, currency flexibility and export results.