New levy imposed on locally made, imported vehicles to boost EV adoption

The federal government has introduced a new “Energy Vehicle Adoption Levy” on locally manufactured and imported vehicles as part of efforts to promote electric vehicle adoption in the country. 

The levy, outlined in the Finance Bill for fiscal year 2025-26, aims to encourage people to transition from traditional internal combustion engine vehicles to electric alternatives, including motorcycles and rickshaws.

Under the new proposal, manufacturers of internal combustion engine (ICE) motor vehicles with an engine capacity of less than 1,300 cubic centimeters will be required to pay a 1% levy on the invoice price, including duties and taxes. The same 1% levy applies to the import of such vehicles. 

For vehicles with engine capacities ranging from 1,300 to 1,800 cubic centimeters, the levy increases to 2%. For vehicles with an engine capacity exceeding 1,800 cubic centimeters, the levy is set at 3%.

In addition to passenger vehicles, the new levy will also apply to buses and trucks with internal combustion engines. Manufacturers of these vehicles will be required to pay a 1% levy on the invoice price, while importers will pay the same percentage on the assessed value of the imported vehicle.

The move aims to reduce the country’s reliance on traditional vehicles by making electric alternatives more attractive through the imposition of these levies, which will be enforced through the Federal Board of Revenue (FBR).