Are hybrid cars being taxed out of their competitiveness?

Before the federal budget was announced, a whirlpool of rumours was circulating regarding the automotive industry. The overwhelming opinion was an expected drop in the price of locally manufactured vehicles. One popular belief was that a recent IMF recommendation pertaining to “free trade” would result in the slashing of import duties which would in turn drop the prices of locally assembled vehicles significantly. 

This however was not the case. In the classic status quo move, the federal government decided it would tax the general public by increasing sales tax on cars. The general sales tax for all vehicles was raised to a flat rate of 18% and a carbon tax of Rs 2.5 per litre was slapped on every poor soul that chose not to go electric and the hopes of potential car purchasers across Pakistan were dashed. 

To add insult to injury the government did not make any official announcements in regards to reducing import duties only giving vague indications of reducing it to 15% over the next few years or so. 

And so we wondered: What of the hybrids? Surely the government, which was so vehemently pushing for a greener automobile policy, wouldn't tax arguably the best and most practical shift to cleaner and greener energy. But that was not the case. Hybrid vehicles have also been caught up in the general increase of sales tax to 18.5%. The tax on hybrid vehicles before this was 8.5% and the increase represents more than double what the original tax was. 

The impact on pricing overall has been brutal but the hybrid market which in the past year or so had become so competitive has taken a particularly strong beating. The price jumps are estimated to be as follows: