As Pakistan prepares for the announcement of Budget 2026-27 on June 12, potential tax changes on electric vehicles (EVs) have become a major concern for buyers and industry stakeholders.

The government is reportedly considering revising sales tax concessions currently available to EVs, hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and range-extended electric vehicles (REEVs). If approved, these changes could significantly increase vehicle prices, particularly for locally assembled EVs.

However, the impact will vary depending on whether the vehicle is locally assembled or imported and, in the case of imported EVs, the size of the battery pack.

Different Tax Rules for Different EV Categories

Electric vehicles in Pakistan currently fall under two primary taxation categories:

• Locally assembled EVs
• Imported completely built units (CBUs)

Because these categories enjoy different tax benefits, the expected price increases will not be the same across the market.

Locally Assembled EVs Could Face the Largest Increase

At present, locally assembled electric vehicles benefit from a reduced sales tax rate of just 1%, compared to the standard 18% sales tax applied to most vehicles.

If the government withdraws this concession, the sales tax on locally assembled EVs would increase from 1% to 18%, resulting in a 17% jump in taxation.

This would make locally assembled EVs the most heavily affected category under the proposed tax revisions. Industry experts believe manufacturers are unlikely to absorb such a substantial increase, meaning most of the additional cost could be passed directly to consumers.

Imported EVs with Batteries Below 50 kWh

Imported EVs equipped with battery packs smaller than 50 kWh currently enjoy a reduced sales tax rate of 12.5%.

Under the proposed budget measures, these vehicles may be shifted to the standard 18% sales tax bracket. This would increase the tax burden by 5.5%.

Several popular EV models sold in Pakistan fall into this category, including:

• BYD Atto 3
• Dongfeng Vigo
• MG Binguo EV
• MG4
• GuGo GiGi
• JMEV Elight

While buyers of these vehicles can expect higher prices if the proposal is approved, the increase would be considerably smaller than what locally assembled EVs could face.

Imported EVs with Batteries Above 50 kWh

Imported electric vehicles powered by battery packs larger than 50 kWh are already subject to the standard 18% sales tax rate.

Since these vehicles are not receiving any special sales tax concession, they are not expected to face additional tax-related price increases under the proposed changes.

As a result, most premium EVs with larger battery capacities may remain unaffected by this specific taxation adjustment.

Tax Impact Summary

REEVs Will Be Treated the Same as EVs

The government is also expected to apply the same tax structure to Range-Extended Electric Vehicles (REEVs).

Currently, two notable REEVs are available in Pakistan:

• Deepal S05
• Forthing Friday

The Deepal S05 is assembled locally and currently benefits from the 1% sales tax concession. If the concession is removed, its tax rate could rise to 18%, resulting in a 17% increase.

Meanwhile, the Forthing Friday is imported as a completely built unit and falls under the sub-50 kWh category. Its sales tax could increase from 12.5% to 18%, adding 5.5% to its tax burden.

A Key Point for EV Buyers

At present, nearly all electric vehicles available in Pakistan are imported models. The notable exception is the Honri VE, which is currently the country's only locally assembled EV.

This means that for most EV buyers, the effect of the proposed tax changes will largely depend on battery size:

• EVs with battery capacities below 50 kWh are likely to become more expensive due to the removal of tax concessions.
• EVs with battery capacities above 50 kWh are not expected to experience additional sales tax increases because they already fall under the standard 18% tax bracket.

Final Thoughts

If the proposed tax revisions become part of Budget 2026-27, Pakistan's EV market could face a noticeable shift in pricing. Locally assembled EVs and smaller imported electric vehicles are expected to experience the largest impact, while larger imported EVs may remain relatively unaffected.

For consumers considering an electric vehicle purchase, the budget announcement could play a crucial role in determining the best time to buy before any new tax rates take effect.