HYDERABAD: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has expressed concern over the sales tax hike on hybrid vehicles, from 8.5 per cent to 25pc, and warned that this short-sighted policy would hurt consumers and cripple the auto industry.

In a statement issued on Saturday, Adeel Siddiqui, a member of the FPCCI Executive Committee, noted that tax concessions on hybrid vehicles expired on June 30 and with no new auto policy notified in time, the Federal Board of Revenue restored the general sales tax rate of 25pc on hybrid electric vehicles and plug-in hybrid vehicles.

He said that this represented a massive increase from earlier preferential rates of 8.5pc for hybrids up to 1800cc and 12.75pc for those above 1800cc.

So, he said, the auto industry was in chaos and automakers have temporarily halted production and stopped issuing invoices because they do not know which sales tax rate to apply.

Calls for notifying new auto policy immediately

He said that a production halt affected thousands of workers, vendors, and transporters, as well as factory workers, who were losing work and wages due to this policy vacuum.

He stated that Pakistan’s energy security was at risk, as it imports about 80pc of its petroleum products, making transport electrification a matter of national security.

He said that the government was discouraging fuel-efficient vehicles and keeping the country dependent on expensive imported fuel by making hybrids more expensive.

Secondly, he said, investor confidence was eroding, and policy uncertainty was damaging it in new-energy vehicle projects.

He said that policy remained regressive, wondering why the government was increasing taxes on hybrids — which offer lower running costs and reduced fuel consumption — while reportedly considering tax relief on vehicles priced above Rs10m. He said that this sends a confusing signal about the government’s policy priorities.

He called for an immediate rollback of 25pc sales tax on hybrid vehicles, or at least a reduction to 18pc until the new auto policy was finalised.

He demanded that Auto Policy 2026-31 should be notified without delay to provide clarity and stability to the industry. He stressed the need for a phased transition to clean energy with incentives tied to local manufacturing and technology transfer.

He said that current policy was a self-inflicted wound that would slow Pakistan’s transition to fuel-efficient vehicles, increase fuel import costs, and damage the auto industry at a time when it was showing signs of recovery.

He said that it was high time to act before damage was done to Pakistan’s automotive sector and energy security.

Published in Dawn, August 16th, 2026