Electric Vehicles - Make-in-Pakistan Perspective

This study entitled ‘Electric Vehicles: Make-in-Pakistan Perspective’ has been completed by The Pakistan Business Council (PBC) as part of its “Make-in-Pakistan” initiative. To carry out this sector study, PBC conducted discussions with the stakeholders and secondary research.

Electric vehicles (EVs) have the potential to drive multi-faceted growth in Pakistan, but clear and focused policy measures are crucial for success. India and several ASEAN countries have already demonstrated successful transitions to EVs, establishing local industries in the process. The global market, regulated by the United Nations WP.29 guidelines, prescribe standards for universal adoption, facilitating cross-border acceptance. This ensures that investments made to create export-focused EV products have consistent long-term demand regardless of the country of origin.

The report explores how EVs can be facilitated in Pakistan through policy and procedural frameworks, leading to a range of long-term benefits. The total cost of ownership (TCO) of EVs remains higher than internal combustion engine (ICE) vehicles, mainly due to high battery costs. However, the economic benefits are significant, including lower fuel imports, a reduction in unutilized generation capacity, and contributions towards greenhouse gas (GHG) reduction. With an export focused vision, the transition to EVs can usher a new era for the auto industry, one which contributes valuable forex to the exchequer instead of draining it.

There is a favorable market opportunity for electric vehicle (EV) adoption in Pakistan’s two-wheeler and three-wheeler market segments. Achieving standardized inter-operable parts will create a large enough market for complete localization of EV components. To enable the use of three-wheelers for personal/non-commercial purposes, the government needs to revise regulations to allow three wheelers for personal, non-commercial use. Two-wheeler and three-wheeler adoption will necessitate charging and battery swapping infrastructure. With readily available home, office and public charging infrastructure adoption of four wheelers will be natural.

The four-wheeler market is hindered by price sensitivity, and the limited domestic demand alone cannot support large-scale local indigenization. To establish such a market and drive growth, Pakistan needs to tap into the global market to access larger customer base and leverage economies of scale. While it may not be feasible for Pakistan to export complete cars in any form, car parts can easily meet the required WP.29 standards and become export-ready. Developing the industry with a vision for global market will contribute to long-term industrial growth. It will lead to economies of scale, enabling the production of globally competitive and cost-effective cars.

Hybrids present a unique opportunity; more expensive than standard EVs, they cater to the eco-friendly and less price sensitive consumer segment. While the scope for indigenization is limited, easing their introduction can serve as a test bed for infrastructure development and regulation.

For the successful adoption of EVs in heavy and light commercial vehicles, substantial investment in charging infrastructure is necessary. Strategically located public chargers along metro routes and motorways can encourage adoption.

Regulatory measures and fiscal incentives have already been introduced to facilitate EV adoption. Adopting the EV regulatory framework set forth by WP.29 is recommended as an initial step to define the EV vision and establish focused policies in Pakistan. However, further clarification is needed in building codes, tariff regulations, and quality specifications. Addressing challenges related to raw material supply chains for EV components, such as lithium and rare earth metals, is crucial to avoid future import dependency. Developing domestic sources or securing sustainable international supply chains is paramount. Regulatory oversight is also necessary to ensure sustainable and efficient use of resources throughout the EV lifecycle. Implementing government charging infrastructure in model cities can catalyze market action and encourage consumer adoption of EVs.

To achieve indigenization of the EV industry, establishing a link between government-funded intellectual property (IP) development and industries, and open-sourcing these developments is essential. Cross-functional industries, such as electronics, that contribute to the EV ecosystem should receive sectoral tax exemptions through HS code extensions.

Moreover, a complete overhaul of the existing people-oriented processes, to an IT-focused one-window portal is necessary to streamline operations and enhance efficiency. This will simplify procedures for businesses, investors, and stakeholders in the auto industry.

Making bold and deliberate decisions is crucial for creating a sustainable and future-proofed auto industry in Pakistan. By adopting standardization, focusing on localized parts manufacturing, promoting indigenization through open-sourced IP, providing time restricted, sharply focused fiscal support, and embracing digital transformation, Pakistan can pave the way for a thriving and competitive EV ecosystem.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 89) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness.