The transition to electric vehicles (EVs) represents a significant opportunity for Pakistan, combining both environmental and economic benefits. However, the country faces numerous challenges as it works toward this vision, according to a recent policy viewpoint from the Pakistan Institute of Development Economics (PIDE).
The viewpoint, authored by senior economic researcher Dr. Usman Qadir, research fellow Mohammad Shaaf Najib, and assistant chief (policy) Saddam Hussain, outlines several barriers that must be addressed for the successful implementation of an EV-driven future.
Key Challenges for EV Adoption
1. High Production Costs One of the primary obstacles for EV adoption in Pakistan is the high cost of production. The technology to assemble and manufacture EVs in Pakistan is still in its early stages, leading to expensive production processes. Additionally, the country’s reliance on imports and lack of associated industries have driven up production costs. High import tariffs further exacerbate the situation, making EVs significantly more expensive than their internal combustion engine (ICE) counterparts.
2. Limited Vehicle Ownership While 61% of Pakistani households own a personal vehicle, the majority of these are two-wheelers, such as motorcycles. Only 6% of households own passenger cars. This limited market for passenger vehicles, combined with the high initial cost of EVs, makes EVs financially inaccessible to middle- and low-income groups who rely heavily on motorcycles for transportation.
3. Range Anxiety and Charging Infrastructure Range anxiety—concern about running out of battery while driving—remains a significant barrier to EV adoption. This is compounded by the lack of widespread charging infrastructure. Recharging takes longer than refueling a conventional vehicle, and the fear of being stranded without a charging station is a major deterrent for potential EV buyers.
4. Low Production Volumes and Capacity Pakistan’s automobile industry currently operates on a small scale, primarily serving local demand. This limits the ability of manufacturers to reduce costs through economies of scale. The country’s auto parts manufacturers also lack the financial and technological capacity to scale up production and improve quality, further hindering EV production.
5. Global Isolation Unlike many countries that have integrated into the global value chain for automobile manufacturing, Pakistan’s auto industry has remained largely isolated. This has prevented local manufacturers from accessing advanced technologies and quality production techniques, which are crucial for producing competitive EVs.
Policy Recommendations
To overcome these challenges, PIDE recommends several policy objectives:
1. Increase Vehicle Ownership There is a need to expand vehicle ownership in Pakistan, especially EVs, by making them more accessible through incentives and subsidies. The aim is to make EVs widely available, especially in the two- and three-wheeler and passenger car segments.
2. Enhance Charging Infrastructure A nationwide network of EV charging stations must be established to alleviate concerns about range anxiety. Policies should encourage commercial, residential, and mixed-use properties to install charging stations, and existing petrol stations should be retrofitted with EV chargers.
3. Boost Local Manufacturing and Production Pakistan needs to significantly enhance its EV manufacturing capacity. The government should offer tax incentives to encourage the establishment and expansion of local manufacturing units. This would reduce dependence on imports and help achieve economies of scale, ultimately lowering production costs.
4. Incentivize EV Adoption To encourage EV adoption, PIDE suggests offering substantial tax concessions on EV imports and locally manufactured vehicles, especially for government purchases. Special incentives could also be offered for the use of EVs in commercial transport, including buses and trucks.
5. Strengthen Local Supply Chains A thriving local supply chain is crucial for the success of EV manufacturing in Pakistan. The government should incentivize the development of a competitive supply chain, ensuring that local auto parts manufacturers are integrated into the global value chain for parts and components.
6. Labor and Training Initiatives Developing a skilled workforce is essential for the growth of the EV industry. The government should invest in vocational training and higher education to produce engineers and technicians who are proficient in EV technology and manufacturing.
7. Green Financing The State Bank of Pakistan should establish green financing programs to support EV manufacturers and buyers. This would provide financial support for the growth of the EV sector and help make EVs more affordable for consumers.
Long-Term Goals
To align with international best practices, PIDE outlines specific targets for EV adoption and production:
• By 2030, 10% of new 4-wheel passenger car sales should be EVs, and 25% of new 2- and 3-wheeler sales should be EVs.
• By 2040, 50% of all new 4-wheel passenger car sales should be EVs, and 75% of 2- and 3-wheeler sales should be EVs.
• By 2035, 50% of locally produced 4-wheel passenger cars and 2/3-wheelers should be EVs.
• By 2030, 10% of all EVs produced in Pakistan should be exported, increasing to 50% by 2040.
Conclusion
The transition to electric vehicles in Pakistan presents a tremendous opportunity, but it is clear that achieving this vision requires overcoming substantial challenges. By adopting a multi-pronged approach focusing on production, import, adoption, and infrastructure development, Pakistan can pave the way for a cleaner, more sustainable future. The success of this transition will depend on government policies that support local manufacturing, incentivize EV adoption, and establish a robust infrastructure for the growing EV market. — ERMD
Unlocking Pakistan’s EV Potential: A Comprehensive Roadmap for Growth
on 26/12/2024
