KARACHI: A recent decision by the Customs Classification Committee to categorise range-extended electric vehicles (REEVs) as battery electric vehicles (BEVs) has sparked concern among local auto manufacturers, who warn that the move could distort the market.
The committee placed REEVs — essentially series hybrid vehicles — under HS Code 8703.8090, the same classification as BEVs, arguing that the vehicles are propelled solely by an electric motor, while the onboard internal combustion engine (ICE) functions only as a generator.
However, the Pakistan Automotive Manufacturers Association (PAMA) has challenged the ruling, describing it as a case of misdeclaration under the Customs Act, 1969, and has taken up the matter with the Federal Board of Revenue (FBR).
PAMA pointed out that the importer declared the vehicle under HS Code 8703.8090, which carries a 25 per cent duty under the Fifth Schedule. In contrast, the exporter in China reportedly declared it under HS Code 8703.6023 — a category for hybrid vehicles — attracting a 50pc duty.
According to the association, HS 8703.8090 applies exclusively to pure electric vehicles, while 8703.6023 covers hybrids. It argues that any vehicle equipped with an ICE, even if used only as a generator, cannot be treated as a zero-emission vehicle eligible for incentives meant for fully electric models.
PAMA further contended that granting such incentives may conflict with the National Electric Vehicle Policy, which restricts benefits to vehicles powered solely by onboard battery charge without any combustion engine.
The association stressed that the dispute involves not only tariff classification but also fiscal incentives. If duty rates were identical, it said, the classification would not be contentious. However, the significant difference in duties makes the distinction critical.
While customs authorities based their ruling on the source of propulsion, industry representatives argue that the presence of an ICE generator — reportedly accounting for at least 15pc of the vehicle’s value — clearly differentiates REEVs from conventional BEVs.
PAMA has urged authorities to suspend and review the decision to ensure that incentives remain limited to genuine zero-emission vehicles and to prevent potential market imbalances.
An industry representative noted that REEVs typically come with a 45-litre fuel tank and exhibit emission levels and fuel efficiency similar to hybrids when not externally charged. He added that exporting countries and UNECE regulations classify REEVs as hybrids.
The Customs Classification Committee clarified that its decision pertains solely to tariff classification and acknowledged that the World Customs Organisation is expected to assign a distinct HS code for REEVs by 2028. However, the extension of BEV-level fiscal incentives ultimately rests with the federal government and cabinet.
Currently, completely built-up (CBU) BEVs below 50kWh are subject to 25pc customs duty and 12.5pc GST. Completely knocked-down (CKD) BEVs benefit from reduced duties on specific parts, 10pc CKD duty, 25pc duty on localised parts, one per cent GST and zero federal excise duty — measures designed to promote zero-emission vehicles without combustion engines.
Industry representatives warn that extending the same concessions to REEVs could lead to a surge in low-duty CBU imports, undermining the viability of CKD operations across ICE, hybrid, plug-in hybrid and BEV segments.
The issue has surfaced as discussions on the Auto Policy 2026–31 are underway, including deliberations on future tariff structures, sales tax treatment and incentives for hybrid, plug-in hybrid, REEV and BEV categories.
Automakers are now awaiting guidance from the Engineering Development Board and the Ministry of Industries and Production, particularly as the upcoming policy must align with IMF commitments, secure federal cabinet approval and achieve consensus among stakeholders.