most significant source of anthropogenic emissions accounting towards climate
change includes transport and power sector. However, we do have a technological
solution for both the sectors that include the deployment of renewable energy
technologies (with storage) and electric vehicles. As with any other
technologies, the mass proliferation of these solutions revolves around the
economics of both technologies. Subsequently, the central pain point/barrier
for a mass mobilization of these technologies is batteries. That is why it is
also termed as Holy Grail for reducing greenhouse gas emissions. For RE,
batteries can provide storage to counterbalance the intermittent nature of wind
and solar technologies while EVs essentially depend upon battery’s
capacity/weight/volume to overcome the technological/financial barriers leading
to make them more cost-effective option when compared to conventionally fueled
vehicles. Improved battery technology can help reshape the transport and energy
industries that contributes most to emissions.
The battery technology
has many complexities as the best solution is dependent on the application and
use case. A battery having a higher capacity that could provide 1000 miles
range may not be a suitable if it offers subpar power, let’s say to top speed
of 20 km/h. Similarly, a battery with higher power that could power a truck to
top speed of 100 km/h may not be suitable due to limited range it may provide,
like 10 miles. Therefore, it is necessary to understand the dynamics of battery
technology to find optimum solution depending upon the use case. Additionally,
specific power and capacity per unit volume and weight is also an essential
factor in deciding the optimum battery for usage.
On upstream side of
manufacturing, battery technology is continuously evolving, starting off from one-time
use (nickel-cadmium batteries) to rechargeable high capcity lithium ion
batteries. Lithium-ion batteries currently
have the highest energy and power densities among
commercially available alternative battery chemistries, which is why they’re in
all of our cell phones and other portable devices. They can store a large
amount of energy and deliver it quickly. However, the primary
barrier to vast adoption of batteries is the cost barrier, that is majorly
defined by the type of materials used in batteries. For usual lithium ion
batteries, the anode (positive electrode of battery) is comprised of graphite
which is a relatively cheaper material. On the other hand, cathode (negative
electrode of material) differs from battery to battery but mainly consist of
LiCoO2 or LiMn2O4 in commercially available. Other elements are also present in
traces amount. Cobalt is the expensive material that drives the economics of
the batteries. This seemingly basic technical information is necessary for the decision
makers to understand that if they would want to kick start the manufacturing of
batteries, cobalt would be the significant pain staking point. So, addressing
that issue can drive the economics of manufacturing batteries locally. According to World Economic Forum the increase demand of batteries
by 2030 will result in four folds increment in cobalt demand. It should also be
kept in mind that battery technologies are continuously evolving, and significant
breakthroughs are achieved every decade or even on yearly basis. For instance,
TESLA on battery day announced that they have developed a cobalt-free battery
which may change the dynamics of battery manufacturing altogether. Lithium
Nickle battery technology is also offering increased capacity for batteries but
is accompanied by safety issues and therefore not yet widely available on
commercial scale. Additionally, Lithium Sulfur and Lithium Air batteries also
offer more than twice the capacity compared to current Lithium Cobalt batteries.
However, the major challenge is the insufficient life cycle, high self-discharge,
and low efficiency.
The decision makers need
to have sound understanding of battery technologies to come up with a customized
framework that could build nexus among different kind of battery technologies based
on use cases. Following matrix could help decision makers to get relevant input
that could essentially help them in coming up with most optimized solution on
policy level with least programmable/technological risk.
The Economic Coordination Committee of the cabinet in Pakistan has approved the Electric Vehicle policy for 2-3 wheelers and Heavy Commercial Vehicles in June 2020. The policy was proposed by the Ministry of Industries after consultation with various ministerial stakeholders (Engineering Development Board, Ministry of Science and Technology, Ministry of Climate Change and others). This publication outlines key features of EV Policy 2020 and salient incentives offered.
Why EVs in Pakistan?
According to a global estimate, around 20 percent of greenhouse gas emissions happen due to various means of transportation. This statistic stands at 40 percent in Pakistan. With transportsector in Pakistan growing with the overall increase in country’s population, transition to EV should become an imminent strategy.
Although Pakistan has a meager contribution to total global Green House Gas emissions – less than 1% – but it continues to remain the most vulnerable to climate change hazards and has low technical and financial capacity to adapt to any adverse impacts. Concerns about climate change and adaption to newer technological frontiers led the government to issue a comprehensive Electric Vehicle Policy 2020 for buyers and manufacturers with an aim to encourage investors to invest in EVs such as two to three wheelers, buses, trucks and cars. The benefits of developing EVs are far ranging – from technology acquisition to employment generation (with creation of more than 40,000 technician jobs), and from attracting foreign direct investment to reducing oil import bill to reduce fiscal and budgetary deficits remain as some of the key motivations for the Government.
General Framework of Financial Incentives
As per 2019, there were only 250 plug-in hybrids and full EVs registered in Pakistan. The government now has an ambitious plan of converting 30% of cars – about one hundred thousand (100,000) and 50% of the five hundred thousand (500,000) two and three wheelers, into electric vehicles in the next four years.
What could be a foreseeable impact of EV Policy 2020?
The most significant impact would be savings in the fuel costs. With EVs, the average fuel consumption of motorbikes in Pakistan is Rs. 6,000 (six thousand) which will be reduced to Rs. 1,000 (one thousand). Similarly, the fuel costs of a 650-800 cc cars will come down to Rs. 1200. Another impact would be the savings in the fuel import bill, which is estimated at Rs. 2 billion per annum. To improve the EV offtake, the Government can offer rebates on capital cost to encourage early adopters. Annual renewal fees may be waived and credits in terms of tax exemptions can be provided to encourage people to opt for EVs. The government may also contribute in terms of financial subsidies, tax preferences, and concessionary credits to promote investment in the sector.
Pakistan’s EV manufacturers
Some of the local significant players in the EV space include:
Karakoram Motors (Dynasty IT electric cars), Karachi
Rahmat Group (for electric cars, two wheelers and buses, in
cooperation with BYD), Nooriababd, Jamshoro.
Master Motors (has signed an agreement with Changan
automobiles for selling and distribution of their cars).
Al Haj Automotive Private Limited (FAW holding, Chinese
company), signed an agreement with Proton, the Malaysian
company for its distribution and assembling, Karachi.
Topsun Motors electric car company (with Chinese
collaboration), Jail Road, Lahore.
Jolta International – electric motorcycle (is a subsidiary of a
Lahore based company Auj).
Sazgar, an electric rickshaw company in Sundar, Lahore
Support for charging infrastructure
As a support for the charging infrastructure, the GOP has set a target of transforming three thousand (3,000) CNG stations to EV charging stations. Different countries follow different charger configurations according to their charging capabilities. The kilowatt capacity of a charger defines the rate at which the battery can be charged, and it also defines at which place such chargers can be deployed. Easy and affordable access to charging infrastructure, both standard AC and rapid DC charging, is key to supporting EVs growth. Distribution companies, private investors and auto manufacturers will have to play their role in developing the required charging infrastructure. On the other hand, the government also needs to outline policies that support all stakeholders in development of a charging network for EVs. For electric cars, there are multiple auto manufacturers with different charging configurations. Pakistan’s public charging infrastructure will be driven by players with large market share in future. For the initial five years, there will be a combination of different charging options. Probably medium or semi-fast chargers will dominate the charging infrastructure with CHAdeMO or CCS. As the density of EVs increases, the next phase will require the installation of fast chargers with higher power ratings. Hyundai recently launched the first electric car IONIQ in Pakistan, which uses CHAdeMO technology. Toyota is marketing its JDM model of Prius Prime (a plug-in hybrid) in the country, also with CHAdeMO technology. New entrants, however, have models that support CCS technology. This could make the case for both CHAdeMO and CCS technology viable options for Pakistan. Going forward, we believe that public-charging infrastructure may be a combination of both of these widely used technologies.
What do industry leaders think about EV Policy 2020?
Raheel Ahmed Liaqat – Sales Manager, ABB Pakistan “Overall, the policy looks good. The implementation might take some time due to the new automobile plants adjusting to newer technological standards from currently MOGAS-based cars. Also, there are only a few EV manufacturers, with very limited learning curve to adapt to the newer technology. Overall, I believe ministries will need to put in more effort, so the final draft of the policy is officially released, and the implementation can take place swiftly. With respect to ABB, we are looking forward to the policy. ABB is already working on the charging solutions in the range of 3kW to 60kW, with all chargers installed in Pakistan are up to 50kW capacity. We have seen the rise in Audis E-tron Quattro sales which are swiftly going up with 250 cars sold and 100 additional orders to be delivered this year. The news of potential collaboration of GM motors and Haier Pakistan for making EVs in Pakistan is also encouraging. Syed Qadir Jillani, Manager Services & Operations, Porsche Pakistan “I appreciate the overall policy but believe that there are a few things that should be finalized before the policy comes out. Overall, Porsche has an electric vehicle market in Pakistan and people have already booked 50 Taycans (Porsche’s EV), with more orders expected in the future. The step to convert 3,000 CNG stations to EV charging stations is also a step in the right direction. We also have our charging station ready and we will take necessary regulatory approvals before deploying it countrywide.”
Muhammad Kamil Quddus, Policy Economist, International Growth Centre Electric Vehicle (EV) Policy of Pakistan is a step in the right direction considering the greatest existential threat of our times, Climate Change. Considering this challenge, any measures related to mitigation and adaptation to climate change must be aggressive which is reflective in the target setting of this policy. However, this needs to match with proactive coordination at policy and operational levels of government functionaries. It is prudent to mention that such ecological challenge needs to be utilized as an opportunity whereby switching fossil fuel vehicles to electric vehicles reap benefits not only for the exchequer but also for industry and public, at large. Targets such as 30% of new vehicle sales for 4 wheelers and 50% of new vehicle sales for 2-3 wheelers by 2030 have great political optics yet obscure us from the core policy objective of “displacement of fossil fuels in general and motor-spirit in particular”. Approximately 25 million vehicles consumer 7.9 million Tonnes of Oil Equivalent (MTOE) currently of motor-spirit. Out of this 25 million, 70% vehicles are 2-3 wheelers consuming ~ 43% (3.4 MTOE) of the motor-spirit. Considering this, a shadow policy target could be to set that ‘X’ percentage of motor-spirit be displaced by the year 2030 or 2040. Furthermore, citizens and civil society should start attaching strings to such targets and claims by successive governments on outputs and not on mere symptoms. Last but not least, the current automobile development policy 2016-2021 and the EV policy 2020 should go hand in hand and the Government should look into the possibility. Smart meters to be utilized as a silver bullet solution in controlling the off-peak usage as well as taking care of overloaded feeders. This serves as a pre-requisite to any operational level penetration of EVs. To ensure that this well-deserved aggressive timeline is met, this pre-requisite needs to be followed up on aggressively.
For more information on EV & its policy, contact us today Integrated financial and infrastructure advisory firm email@example.com Office 9, 3rd Floor, Executive Complex, G-8 Markaz, Islamabad. +92 321 5588 355