The sales tax on locally‑produced hybrid cars with engines up to 2,000 cc has been slashed from 25 % to 18 %.
The federal government formalised the reduction through S.R.O. 1525(I)/2026, issued on 13 September 2026. By aligning the levy on these hybrid electric vehicles (HEVs) with the standard rate applied to most goods, the policy removes a sizable fiscal barrier that had made domestically assembled hybrids considerably more expensive than conventional petrol‑engine models.
Automakers that assemble HEVs in Pakistan stand to benefit from lower production costs, which can translate into more competitive pricing and higher profit margins. Industry insiders anticipate that the tax cut will encourage existing plants to expand capacity and may attract new entrants eager to tap into a market that is still nascent but growing rapidly thanks to government incentives.
For buyers, the reduced tax translates into a tangible price drop, making hybrid technology more accessible to middle‑income families who have previously been priced out of the segment. The affordability boost is expected to accelerate the shift toward low‑emission vehicles, helping the country curb its reliance on imported fuel and move closer to its climate‑action targets outlined in the National Climate Change Policy.
Overall, the move dovetails with a broader push by the Ministry of Climate Change and the Ministry of Industries to foster sustainable transport solutions. By easing the tax burden on home‑grown hybrids, the government aims to nurture a domestic supply chain, create jobs, and lay the groundwork for a greener automotive future in Pakistan.