KARACHI: The government’s favourable tax and duty treatment for New Energy Vehicles (NEVs), including a flat 1 percent sales tax regime, could cost the national exchequer an estimated Rs150 billion annually in foregone revenue, according to Abdul Rehman, former chairperson of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAPAAM).
Rehman said annual NEV sales can reach around 50,000 units, with the average reduction or subsidy in duties and taxes amounting to approximately Rs3 million per vehicle, taking the implied annual revenue concession to around Rs150 billion.
He said this is not a minor policy incentive but a significant fiscal decision, as the government is willing to forego this sum in potential revenue at a time when every additional rupee of taxation is being sought elsewhere. Someone ultimately bears the cost of revenue the state chooses not to collect, he said, adding that the opportunity cost is the real issue.
Rehman acknowledged that Pakistan needs an electric vehicle transition, citing cleaner transportation, reduced fuel imports, lower emissions and the development of a domestic EV industry as legitimate national objectives. However, he argued there is nothing inherently progressive about subsidising an expensive private vehicle.
He said that if the government has fiscal space equivalent to Rs150 billion to accelerate electric mobility, there are alternative uses that could benefit a far larger section of society, including electric buses, charging infrastructure, electric motorcycles and rickshaws, public transport systems, local battery and component manufacturing, and other mass market mobility solutions.
The question is not whether NEVs deserved support, he said, but whether this is the most equitable and economically productive way to spend that support. A subsidy, he argued, should generate a public return proportionate to its fiscal cost.
Rehman said the scale of the disparity becomes particularly striking when placed against the government’s education spending. For FY2025-26, the Higher Education Commission (HEC) has been allocated approximately Rs35 billion, while the estimated annual fiscal concession associated with 50,000 NEVs could be around Rs150 billion, more than four times the HEC allocation.
He said one policy potentially sacrificed four times the amount allocated to higher education while benefiting a relatively small number of vehicle purchasers, a comparison he said should force policymakers to confront a basic question of national priorities. Pakistan’s young population needs universities, skills, research, technology and employment opportunities, while its cities need reliable public transportation and its economy needs infrastructure and productive investment, he said.
Rehman said that if the objective is industrial development, there should be clear requirements for localisation, investment and employment. If the objective is mass adoption of electric mobility, he said, incentives should reach consumers who currently depend on motorcycles, rickshaws and public transportation, not primarily those already capable of purchasing high-value cars.
Good policy, he concluded, is not simply about choosing the right technology, but about targeting public resources where they produce the greatest economic and social return.
