Auto Parts Industry Raises Serious Concerns Over Proposed Incentives for PHEV & REEV Vehicles

 

The Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) has expressed deep concern over proposals in Pakistan’s upcoming Auto Policy 2026–31 that may extend incentives to Plug-in Hybrid Electric Vehicles (PHEVs) and Range Extended Electric Vehicles (REEVs) on par with pure Battery Electric Vehicles (BEVs).

PAAPAM emphasized that PHEV and REEV technologies are not zero-emission vehicles, as both continue to rely on internal combustion engines and fossil fuels. Both contain up to 1500cc VVTi engines, fuel tanks and exhaust systems. Therefore, granting them the same fiscal and regulatory incentives as fully electric BEVs would be inconsistent with the objective of promoting genuinely clean and sustainable transportation. Reducing sales tax rate from 18% to 1% on PHEV and REEV would result in huge revenue losses to the Federal Board of Revenue (FBR).

The association stressed that the regulatory frameworks of regional countries including Thailand, Malaysia, and Indonesia demonstrated a clear and deliberate policy distinction between pure Battery Electric Vehicles (BEVs) and transitional electrified technologies such as Plug-in Hybrid Electric Vehicles (PHEVs) and Range Extended Electric Vehicles (REEVs). 

Across all three regional automotive manufacturing hubs, BEVs are treated as strategic zero-emission technologies and are granted substantial fiscal incentives, localization-linked benefits, and industrial policy support. PHEV and REEV vehicles, on the other hand, continue to be treated as transitional hybrid technologies and do not receive the same comprehensive incentive regime available to BEVs.

The Association further highlighted that the majority of PHEV and REEV vehicles currently being imported into Pakistan are in the form of Completely Built Units (CBUs) or are merely being assembled using imported Completely Knocked Down (CKD) kits and have virtually zero localization content. Large-scale imports of such vehicles and parts would severely undermine Pakistan’s domestic auto parts manufacturing industry, which has invested heavily over decades to build local capability, employment, and industrial infrastructure.

PAAPAM cautioned that indiscriminate incentives for non-localized imported vehicles could lead to massive displacement of local parts manufacturers, loss of employment across the automotive vendor industry, erosion of Pakistan’s industrial base and increased dependence on imports and pressure on foreign exchange reserves.

The Association urged policymakers to ensure that the Auto Policy 2026–31 protects and promotes local manufacturing, technology transfer, and progressive localization instead of encouraging import-dependent models that offer little value addition to Pakistan’s economy.

PAAPAM reiterated its support for environmentally sustainable mobility solutions but stressed that policy incentives must prioritize true zero-emission vehicles alongside strong localization commitments to safeguard Pakistan’s automotive engineering and manufacturing ecosystem.