A recent ruling by the Customs Classification Committee, which classified range-extended electric vehicles (REEVs) as battery electric vehicles (BEVs), has sparked concerns among local auto assemblers, who say the decision overlooks key market realities and could lead to significant market distortion.
The committee placed REEVs, essentially series hybrids, under HS Code 8703.8090 the same category as BEVs because propulsion is provided solely by an electric motor, with the onboard internal combustion engine (ICE) functioning as a generator.
However, the Pakistan Automotive Manufacturers Association (PAMA) has termed the matter a case of misdeclaration under the Customs Act, 1969, and raised the issue with the Federal Board of Revenue. PAMA noted that while the importer declared the vehicle under HS Code 8703.8090, attracting a 25 percent duty, the exporter in China declared it under HS Code 8703.6023, which carries a 50 percent duty.
PAMA stressed that HS 8703.8090 applies to pure electric vehicles, while 8703.6023 covers hybrids. The association argued that a vehicle with an ICE, even if used only as a generator, cannot be considered a pure electric vehicle and should not receive incentives intended for zero-emission vehicles. They noted that the inclusion of an ICE may also contravene the National Electric Vehicle Policy, which restricts incentives to all-battery vehicles operating solely on onboard battery charge.
Industry representatives further argued that the presence of an ICE generator, reportedly constituting at least 15 percent of the vehicle’s value, makes REEVs distinct from standard electric vehicles. They warned that extending BEV-level fiscal incentives to REEVs could distort the market, trigger a surge in low-duty REEV imports, and undermine the viability of CKD operations across ICE, HEV, PHEV, and BEV segments.
Assemblers noted that REEVs typically feature a 45-litre fuel tank, with emissions and fuel efficiency comparable to hybrids when not externally charged. They highlighted that exporting countries and UNECE regulations classify REEVs as hybrids, not as pure electric vehicles.
While the Customs Classification Committee said its ruling only applies to tariff classification and acknowledged that the World Customs Organisation is expected to assign a separate HS code for REEVs by 2028, the decision to extend BEV-level fiscal incentives rests with the federal government and cabinet.
Currently, completely built-up (CBU) BEVs below 50kWh attract 25 percent customs duty and 12.5 percent GST, while completely knocked-down (CKD) BEVs benefit from reduced duties and exemptions on parts and federal excise, aimed at promoting zero-emission vehicles without combustion engines.
Industry representatives have called for clarity from the Engineering Development Board and the Ministry of Industries and Production, especially as the upcoming Auto Policy 2026-31 is being discussed. The policy will address tariff structures, sales tax treatment, and concessions for hybrid, plug-in hybrid, REEV, and battery electric vehicles, while aligning with IMF commitments and federal cabinet approval.
