Pakistan’s incentives for New Energy Vehicles (NEVs) could result in an estimated annual revenue concession of around Rs150 billion, as the government offers highly favourable tax and duty arrangements, including a flat 1% sales tax regime.
Abdul Rehman, former chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAPAAM), said current projections suggest annual NEV sales could reach approximately 50,000 units. With the average reduction in duties and taxes estimated at nearly Rs3 million per vehicle, the resulting revenue foregone by the government could total about Rs150 billion each year.
He described the measure as a major fiscal policy decision rather than a minor incentive, arguing that the government would be giving up substantial revenue at a time when additional taxes are being imposed elsewhere.
According to Rehman, Pakistan has legitimate reasons to promote electric mobility, including reducing fuel imports, cutting emissions, improving urban transportation and encouraging the development of a domestic electric-vehicle industry. However, he questioned whether providing substantial incentives for expensive private vehicles represents the most effective use of public funds.
He suggested that similar fiscal resources could instead be directed toward projects with broader public benefits, such as electric buses, charging networks, electric motorcycles and rickshaws, improved public transport, and domestic production of batteries and other EV components.
“The issue is not whether NEVs should receive government support, but whether the existing approach delivers the greatest possible economic and social benefit,” Rehman said, stressing that public subsidies should generate returns commensurate with their fiscal cost.
He also highlighted the disparity between the estimated NEV-related concession and government spending on higher education. For the fiscal year 2025-26, the Higher Education Commission (HEC) was allocated around Rs35 billion, while the projected annual tax concession for 50,000 NEVs could reach Rs150 billion—more than four times the HEC allocation.
Rehman said the comparison raises questions about the country’s spending priorities, particularly as Pakistan’s growing youth population requires greater access to universities, skills development, research, technology and employment opportunities.
He argued that if the government’s primary goal is industrial development, NEV incentives should be tied to measurable commitments involving local manufacturing, investment and job creation. If the objective is widespread adoption of electric transportation, he said, incentives should focus more on motorcycles, rickshaws and public transport users rather than mainly benefiting consumers purchasing high-value cars.
“Effective policy is not merely about promoting the right technology; it is about directing limited public resources toward areas that deliver the highest economic and social returns,” Rehman concluded.
Pakistan records remittances inflow of $3.7 billion in August 2026
