Pakistan’s New Energy Vehicle Policy Faces Criticism Over Inclusion of Plug-In Hybrids
By Tanveer Ahmed :
Pakistan’s proposed New Energy Vehicle (NEV) policy is facing mounting criticism from industry stakeholders over what they describe as a major contradiction in the government’s electric mobility strategy — the decision to place plug-in hybrid electric vehicles (PHEVs) in the same incentive category as fully battery electric vehicles (BEVs).
The draft policy, aimed at accelerating the country’s transition towards cleaner transport and reducing dependence on imported fuel, proposes extensive fiscal concessions for both BEVs and PHEVs. These incentives include a proposed one per cent sales tax and reduced import duties.
However, critics argue that grouping the two technologies together undermines the very objectives of the policy because plug-in hybrids still rely heavily on internal combustion engines and cannot be classified as zero-emission vehicles.
The controversy has intensified because the policy itself applies different standards to different vehicle categories. Under the proposed framework, only fully battery-powered two- and three-wheelers qualify for NEV incentives, while passenger and commercial vehicles become eligible even if they are plug-in hybrids with an electric-only range of 50 kilometres.
Industry representatives say this creates a regulatory inconsistency and risks distorting the market in favour of transitional technologies rather than fully electric transport.
According to senior industry representative Aamir Allahawala, the distinction between BEVs and PHEVs is fundamental rather than technical.
“BEVs are zero-emission and should be encouraged. However, PHEVs are not zero-emission because they combine an engine with a battery,” he said.
Allahawala warned that the proposed tax framework could severely disrupt Pakistan’s automotive ecosystem. He argued that applying a one per cent sales tax equally to both BEVs and PHEVs would make localisation financially unviable for manufacturers already paying 18 per cent tax on imported raw materials.
“Our viewpoint is that only BEVs should have a one per cent sales tax. PHEVs should face an eight to nine per cent tax, even if not 18 per cent,” he added.
The NEV policy seeks to aggressively expand electric mobility in Pakistan over the next two decades. The framework targets electric vehicles accounting for 50 per cent of all new sales in the two- and three-wheeler and bus segments by 2030, while electric four-wheelers and trucks are projected to constitute 30 per cent of new sales.
By 2040, the government aims for EVs to make up 90 per cent of all new vehicle sales, with a fully zero-emission fleet envisioned by 2060.
To support this transition, the policy proposes the establishment of 3,000 charging stations nationwide by 2030, including battery-swapping infrastructure. The government also views transport electrification as a key strategy for reducing Pakistan’s oil import bill and improving energy security.
Despite these ambitions, critics argue that generous concessions for PHEVs could weaken demand for genuine electric vehicles while increasing pressure on foreign exchange reserves through imports of hybrid kits and components.
A senior executive of a Japanese automobile company operating in Pakistan warned that Pakistan risks moving in the opposite direction from global trends.
“While countries around the world, including China, maintain a clear distinction between BEVs and plug-ins, Pakistan appears to be blurring the lines,” he said.
The executive cautioned that if plug-in hybrids become significantly cheaper than both petrol and fully electric vehicles because of government subsidies, consumers will naturally shift toward PHEVs, damaging investments already made in electric mobility.
Industry stakeholders point out that many governments globally now treat plug-in hybrids only as transitional technology. Several European countries have already reduced or eliminated subsidies for PHEVs after studies showed their real-world emissions often exceeded official claims because drivers continued relying heavily on petrol engines instead of regular charging.
India has adopted one of the strictest approaches by offering sharply reduced taxes only to fully electric vehicles, while plug-in hybrids receive no special treatment. China and Thailand also tie incentives to strict emissions and electric-range requirements.
Local vendors and manufacturers fear Pakistan’s proposed structure could damage the country’s long-established automotive supply chain.
One vendor representative warned that more than 500 auto parts manufacturers could face severe losses if plug-in hybrids become cheaper than petrol-driven vehicles due to heavy subsidies.
“This represents billions in wasted investments and risks wiping out thousands of highly skilled industrial jobs,” the representative said.
Industry officials also questioned the fairness of financing the transition. According to one executive, conventional vehicle manufacturers are already paying a “New Energy Vehicle” tax while the funds collected are now being used to subsidise competing PHEV technologies.
At the heart of the debate is a broader policy question: whether Pakistan should prioritise rapid electrification through fully zero-emission transport, or pursue a broader subsidy regime that encourages transitional technologies while potentially disrupting local manufacturing and delaying the shift toward pure electric mobility.
The discussion is expected to intensify as the government finalises the NEV policy and balances competing pressures from environmental goals, industrial interests, revenue concerns, and consumer affordability.
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