Introduction: What’s Fueling the Surge?
New budgetary measures are set to significantly raise the cost of locally assembled cars. Industry insiders believe prices could go up by as much as Rs. 600,000, echoing earlier GST-driven hikes on entry-level vehicles in under 850 cc segments.
Budget 2025–26: The Tax Impetus
The catalyst behind this sharp increase is the government’s Budget 2025–26. It introduces a New Energy Vehicle (NEV) Adoption Levy, part of the so-called “Green Tax.” Previously only applied to internal combustion engine (ICE) vehicles, this tax now extends to hybrids (HEVs), excluding only plug-in hybrids (PHEVs) with over 50 km of electric range.
Hybrid vehicle owners will see a 2% Green Tax on their vehicle’s ex-factory price—regardless of whether it’s locally assembled. This levy targets vehicles within the 1,301–1,800 cc engine bracket, affecting popular models like the Haval H6 HEV, Toyota Corolla Cross Hybrid, Hyundai Tucson Hybrid, Kia Sorento HEV, and more.
How the Numbers Add Up
Let’s break down the numbers: for a locally assembled hybrid priced at Rs. 15 million, the new 2% Green Tax represents an additional Rs. 300,000. Combined with other levies such as increased GST and standard duties, these vehicles could cumulatively face price hikes nearing Rs. 600,000 per unit.
Who’s Paying the Price?
This tax overhaul largely impacts middle- to upper-tier vehicles, particularly:
- Hybrid models in the 1.3–1.8 L range, now burdened by 2% on top of existing duties.
- SUVs and crossovers, such as the Hyundai Tucson/ Santa Fe and Kia Sportage/ Sorento, which often exceed Rs. 10 million in factory pricing.
Essentially, nearly all non–electric vehicles will see sticker shock in the coming months.
The Government’s Justification
The authorities justify this move on environmental grounds. With Pakistan struggling to meet emission goals, the “Green Tax” aims to discourage combustion-engine vehicles and fund anti-pollution initiatives. It also nudges consumers toward zero-emission EVs and PHEVs.
What Buyers Should Consider
- Plan ahead – Delaying a midsize ICE or HEV purchase may help avoid the full brunt of scheduled price increases.
- Compare alternatives – Fully electric vehicles (EVs) and eligible PHEVs exempt from the Green Tax may offer cost advantages over time.
- Factor in total cost – Beyond the sticker price, consider long-term ownership costs such as fuel, maintenance, insurance, and resale value.
Final Takeaway
As of June 27, 2025, local car prices are projected to increase dramatically—by up to Rs. 600,000 in many models—due to the new Green Tax and revised duties on hybrids and ICEs. Buyers and dealers are advised to reevaluate purchase plans and consider greener alternatives to mitigate these costs.
Have Your Say
Are you still planning to buy an HEV or ICE vehicle? Will this tax shift drive you toward EVs or PHEVs instead? Let us know your thoughts in the comments!
