Toyota Pakistan Accuses Competitors of Misusing GST Relief on EVs

Indus Motor Company (INDU) has expressed concerns that certain competitors may be improperly classifying vehicles to take advantage of reduced GST rates on range-extended electric vehicles (REEV). The issue is currently being investigated by regulators, including the Federal Board of Revenue (FBR). INDU expects the matter to be resolved soon, which would create a more equitable competitive environment for automakers.

During the company's 37th Annual General Meeting, INDU discussed its FY2026 financial results alongside the REEV classification concerns. A Range Extended Electric Vehicle (REEV) combines an electric motor with an internal combustion engine to recharge the battery while powering the vehicle. The Customs Classification Committee previously categorized REEVs under the same Harmonized System code as battery electric vehicles, as they rely solely on the electric motor for propulsion.

The Pakistan Automotive Manufacturers Association had previously challenged this classification, arguing that REEVs are essentially series hybrids that still depend on an onboard combustion engine and fuel. INDU, which offers EVs and plug-in hybrid electric vehicles (PHEV), expressed that Toyota's global rollout of these vehicles will depend on government approval, ratification, and the announcement of the new auto policy.

The company's gross profit margin declined to 10.3% in the fourth quarter of FY2026 from 13.3% in the same quarter the previous year and 15.5% in the third quarter of FY2026 due to strategic pricing and increased dealer incentives for marketing purposes. To address production disruptions caused by the ongoing geopolitical situation, INDU plans to invest Rs.

4 billion to Rs. 5 billion in capital expenditures for 2027 to localize parts and components. The company also increased inventory to mitigate shipment delays and minimize the impact of ongoing geopolitical tensions on production. INDU's Hilux sales declined in FY2026 due to a reduction in government purchases resulting from the ongoing conflict.

The company anticipates that the resolution of the REEV classification issue will help address disparities in tax treatment between competing products.