EV Tax Breaks Could Cost Govt Rs. 150 Billion A Year

Pakistan's tax incentives for New Energy Vehicles (NEVs) may cost the government approximately Rs. 150 billion annually as sales surge, according to Abdul Rehman, former chairperson of the Pakistan Association of Automotive Parts and Accessories Manufacturers. Rehman projected NEV sales could peak at 50,000 units per year, with tax and duty exemptions averaging Rs.

3 million per vehicle. This would lead to an estimated annual revenue concession of around Rs. 150 billion. He questioned whether the incentive's scale justified the benefits for those who would gain from it. The government is offering NEV buyers favorable conditions, such as a flat 1 percent sales tax regime, while simultaneously seeking additional revenue from other sectors.

Rehman emphasized that while transitioning to electric mobility is crucial for Pakistan to reduce fuel imports, emissions, and promote a domestic EV industry, government support should be strategically targeted at broader sectors like electric buses, motorcycles, rickshaws, charging infrastructure, public transportation, and local production of batteries and components.

These alternatives could amplify the advantages of the electric vehicle transition beyond the affluent segment of private car owners. The proposed concession's magnitude, compared to other sector allocations like the Higher Education Commission's Rs. 35 billion budget for FY 2025-26, is substantial, suggesting the government should impose clear conditions on EV incentives, such as localization, investment, and employment targets, if industrial growth is the goal.

If the objective is widespread adoption of electric mobility, incentives should cater to motorcycle, rickshaw, and public transportation users. Rehman contended that the question isn't whether Pakistan should back electric vehicles, but how to allocate public funds to maximize economic and social returns. He advocated for a thorough review of the current incentives' costs and benefits.