ISLAMABAD – Pakistanis considering Toyota Corolla Cross or Honda HR-V e need to look into hybrid vehicles prices as with expiry of the hybrid sales tax concession on June 30, 2026, that advantage ended. Unless fresh incentives are announced, hybrid vehicles now fall under the standard 25% sales tax regime, setting stage for million-rupee price hikes and leaving both car buyers and automakers waiting for clarity on the government’s next move.
With no extension announced for the concession, locally assembled Hybrid Electric Vehicles (HEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) have reverted to the standard 25% sales tax regime. The shift marks a sharp increase from the earlier preferential rates of 8.5% for hybrids up to 1800cc and 12.75% for hybrids above 1800cc.
The change is expected to significantly increase the cost of purchasing hybrid vehicles, potentially slowing one of Pakistan’s fastest-growing automotive segments. If manufacturers pass on the entire tax burden to customers, hybrid vehicles across multiple brands could become significantly more expensive.
Popular models from Toyota, Honda, Hyundai, Kia, Haval, MG, Jaecoo and GWM are expected to see price increases ranging from around Rs1 million to more than Rs2.5 million, making them considerably less affordable.
The sudden lapse of the concession has reportedly created confusion among automakers, with several manufacturers temporarily holding back hybrid vehicle invoices while awaiting official guidance on the applicable tax rate.
Industry stakeholders are now looking toward the upcoming Automotive Industry Development and Export Policy (AIDEP 2026–31) for clarity on whether hybrid vehicles will receive fresh incentives or continue to remain under the standard tax structure.
The reduced sales tax for hybrid vehicles was introduced under the previous automotive policy as a temporary incentive to encourage the adoption of fuel-efficient vehicles. That incentive expired on June 30, 2026, and in the absence of a fresh notification, the law automatically restores the standard sales tax provisions.
As things stand, hybrid vehicles now fall under the same 25% sales tax applicable to combustion-engine vehicles valued above Rs4 million or having an engine capacity of 1400cc or more. Experts believe higher prices could cool demand for hybrid vehicles, which had gained popularity because of rising fuel prices and lower running costs.
With the upfront cost increasing substantially, many prospective buyers may postpone purchases, switch to smaller petrol-powered vehicles or enter the used-car market instead of opting for a new hybrid. Manufacturers may also witness lower sales volumes until tax policy becomes more predictable.
The end of the concession comes at a crucial time for Pakistan’s automotive sector. A slowdown in hybrid adoption could delay the country’s transition to cleaner and more fuel-efficient vehicles, keeping fuel consumption and import costs elevated.
The uncertainty may also affect investor confidence in new-energy vehicle projects, particularly while the next automotive policy is still under discussion.
The hybrid tax incentive was always intended to be temporary under the previous five-year automotive policy. Since no extension was announced, the concession expired automatically at the end of June.
Several factors are believed to have contributed to the decision, including the government’s need to strengthen tax revenues, ongoing fiscal pressures, the transition to a new automotive policy framework, and a possible shift toward more targeted incentives that encourage greater localization and long-term industry development.
The future of Pakistan’s hybrid vehicle market now hinges on the government’s upcoming automotive policy.
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