ISLAMABAD: The local assemblers want the government to incentivise hybrid vehicles instead of granting massive tax exemptions to facilitate the promotion of four-wheeler electric vehicles (EVs) and urged the government to give no undue favours to new entrants.

According to sources in the auto industry, a good EV model cost around Rs 5 million despite so many incentives. In contrast, the hybrid vehicle can be available at Rs 3.5 million without any tax concessions. “If we import 20,000 EVs it may cost around $600 million whereas it will save $22 million in the shape of fuel, I don’t think it’s an economically viable option,” a senior official of Indus Motors told The Correspondent. If the government facilitate us we can introduce Toyota hybrid cars in two and a half to three years,” he said. He said hybrid car give a mileage of 25 to 28 kilometre in one litre of petrol which is almost half of what conventional vehicles right now consuming in the country. He said EV technology is at a formative stage and comparatively expensive viz-a-viz traditional fuel vehicles. They said though the governments throughout the world are trying to make this technology affordable through different financial and fiscal incentives, including disbursement of direct financial subsidy. He said the batteries used in EVs start degenerating quite soon, and in Pakistan, the charging of these batteries is costlier because of higher electricity tariffs.

It may be mentioned here that the summary approved by the cabinet allowing one per cent sales tax for locally-made EVs up to 50 kwh and light commercial vehicles (LCVs) up to 150 kwh. The cabinet also capped the duty on import of charging equipment at 1%. At the same time, the EVs will also be exempt from federal excise duty (FED). In contrast, the import of plant and machinery for the manufacturing of these vehicles would also be duty-free.

The government has further removed additional customs duty (ACD) and accounting services and tax on EV imports. As per the policy, there will be only 1% tax on importing EV parts for manufacturers. Apart from the tax facilities, the government has also waived registration and annual renewal fee for EVs in Islamabad.

Indus Motors’ official said that the government in the last Auto Policy gave undue incentives new entrants. Still, since the government was the view that to encourage investment it deemed necessary, they accepted it. He said 20 greenfield licenses were issued to new entrants out of which Korean brands Hyundai, Kia, Chinese brands Changan, MG, JW and Japanese brand Isuzu already start their operations. However, the launch of Volkswagen has been delayed because of COVID-19 and other reasons for a while. He said right now the existing players like Toyota, Suzuki or Hino Pak have to pay 46% duty on import of CKD kit and 25% on the import of non-localized parts. In contrast, new entrants have to pay 30% duty on importing CKD kit and just 10% on the import of non-localized parts. He said since the incentive period for new entrants will expire on 21 June 2026, he urged the government not to extend this period because they are already paying 16% additional duty on CKD and 15% on imported non-localized parts.  What really concerned us that MG JW just start working on their project and Volkswagen may also start working on the project this year. There is a strong probability that they might seek extension in relief period, and if this happens then our future investment plans can also hurt or shelved,” he observed.

Regarding not passing on the benefit of appreciation of rupee value against the dollar, he admitted the fact that because of the devaluation of rupee in 2018-19 the prices of cars sharply increased but at the same added that during Pandemic of COVID-19 the lay-offs in the auto sector remained minimal despite complete lockdown for two months in the country. “The recent appreciation in rupee value helped us to overcome losses we incurred during lockdown period” he observed. He said that 2018 and 2019 decreased cars’ sales by over 50% because of the slump in the economy and the government decision to prohibit non-filers from purchasing cars. Compared to previous year auto sales increased by 25%, but they’re compared with the numbers of 2017, the increase in sales is nominal. 

He said that government decision to impose taxes on the selling of new cars within 90 days of purchase to control ‘On Money’ practice is a positive step in the direction and will help check the speculative buying. We floated this idea to the FBR three years back, and now they finally implement it which is great, he added.

Hamza Habib is a senior journalist and former editor of who has previously worked for leading newspapers and TV networks of the country. He mainly writes on the economy and political issues.


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