Vehicle Prices rise after Carbon Levy to support EV transition

In a significant move aimed at promoting electric vehicles (EVs) and reducing the country’s fuel import bill, the Government of Pakistan has officially implemented a Carbon Levy on gasoline-powered vehicles and fuels, effective July 1, 2025.

Under the new policy, a 1% levy will be imposed on motorcycles and auto-rickshaws, 1% on cars up to 1300cc, 2% on vehicles between 1301cc and 1800cc, and 3% on vehicles exceeding 1800cc, including high-end cars and SUVs. Additionally, a 2.5% levy has been introduced on the consumption of petrol, diesel, and high-octane fuels.

The sources said, the Carbon Levy aims to reduce carbon emissions, encourage the use of electric vehicles, and lessen Pakistan’s dependency on imported fossil fuels, which contribute significantly to the national trade deficit.

“The introduction of this levy is part of a broader climate strategy,” a government spokesperson said. “We are aligning with global environmental goals and incentivizing the transition to cleaner transportation technologies.”

As a result of this policy shift, motorcycle manufacturers have already started raising prices for internal combustion engine (ICE) models, citing increased production costs and lower market competitiveness. Industry analysts anticipate similar price adjustments across other segments in the coming weeks.

The government has also hinted at potential subsidies and incentives for EV buyers and manufacturers in upcoming fiscal plans to further accelerate adoption. With rising environmental awareness and supportive regulation, Pakistan is taking a bold step toward a greener and more energy-resilient future.