Charging infrastructure key to fast adoption of electric vehicles

Published February 7, 2021
Approval of the country’s first five-year Electric Vehicle (EV) policy for cars in December has led auto industry analysts and car enthusiasts to predict a rapid and early adoption of the technology by Pakistani customers. — AFP/File
Approval of the country’s first five-year Electric Vehicle (EV) policy for cars in December has led auto industry analysts and car enthusiasts to predict a rapid and early adoption of the technology by Pakistani customers. — AFP/File

LAHORE: The approval of the country’s first five-year Electric Vehicle (EV) policy for cars in December has led auto industry analysts and car enthusiasts to predict a rapid and early adoption of the technology by Pakistani customers.

But the Chinese carmakers remain cautiously optimistic about the nation’s EV future, saying a lot hinges on if the country decides to leapfrog to electrical future or tries to move forward through hybrid technology. Even a direct shift to EV technology will depend on how fast charging infrastructure can be developed in the country.

“It will take some time before the Pakistan EV story unfolds but it will,” says Almas Hyder, chairman of the Engineering Development Board, which has designed the policy. “It depends on how fast we can develop charging infrastructure in cities and on highways.” But, he adds, smaller electric cars with the battery packs for up to 200km haul could come much earlier.

EV technology is long considered an answer to the oil import bill and the environmental degradation of countries like Pakistan, whose fuel imports form a major burden on their weak external accounts. Also, the electricity cost of charging an electric car is almost a third of that spent on the fuel in a comparable ICV (internal combustion vehicle). Besides, their maintenance costs are only a fraction that of ICVs.

Mr Hyder says the EV adoption mostly remains slow across the countries despite its advantages, and tax and policy incentives given by governments to manufacturers and buyers both. “China remains the only exception because it embraced the EV technology more rapidly with the electric bikes and scooters laying the ground for its EV market growth.”

The adoption of EV technology in Pakistan could be inhibited by range anxiety, unavailability of charging infrastructure and, more importantly, 30/40 per cent higher upfront cost in spite of huge headroom for growth, argues an auto vendor.

The policy for four-wheeler seeks to boost the demand and make local assembly attractive and profitable. The effective rate of duty on EV CKDs will be in the range of 6-8pc compared with 15-18pc for ICVs. The smaller cars with battery capacity of 50kWh or below or light commercial vehicles with battery capacity of 150kWh have been given an additional concession: the sales tax rate on them has been slashed to 1pc from 17pc.

Nevertheless, the bigger EV cars will continue to attract the normal sales tax rate. In addition, the importers of CBUs (completely built units) will continue to pay 25pc import duty to keep their prices high for supporting the assemblers and discourage EV imports. The rate of duty will be halved to 12.5pc on import of 100 vehicles (in single batch).

Incentives for investors

In order to encourage investment in charging infrastructure, only 1pc duty will be charged on equipment imports. “The duty and tax structure for electric cars is kept lower to bring prices down at the same levels as those of ICVs. The smaller cars with battery capacity of or below 50kWh have been given additional incentive because we want to promote entry-level, smaller cars of up to 1000cc engine capacity,” Mr Hyder contends.

He says the tax incentives under the policy will be available for imports of up to 100 CBUs to companies that plan to set up their manufacturing facilities in Pakistan. “If a company uses these tax incentives, but fails to invest in local assembly, it will be bound to pay back the actual taxes and duties on the imported CBUs. Before importing CBUs, every importer who intends to use the incentives will sign a bond with the Pakistan Customs and deposit bank guarantee equal to the amount of the tax concessions.”

Japanese assemblers reluctant

While the Japanese carmakers, who are yet to adopt the EV technology, are demanding same tax and duty concessions for their hybrid vehicles in the new Automotive Industry Development and Export Plan (AIDEP) being designed, the Chinese automakers are quite excited about it.

“We are very excited about the EV policy and plan to launch Chinese electric cars with smaller battery capacity enough to support 100-200km commute in one charge at affordable prices,” Adeel Usman, the managing director of Regal Motors, which is collaborating with Chinese carmaker — Dongfeng Sokon — to produce its cars and SUVs under a technical licence in Pakistan, says.

Yet the Chinese car producers have certain reservations about the policy. “We are very bullish on the EV policy because our Chinese OEM — Changan — has EV variants of all its models. But there are a couple of issues, which need to be settled before we can invest in our manufacturing plant,” contends Danial Malik, CEO of Master Changan Motors (MCM), the only joint venture between a Pakistani and a Chinese carmaker where OEM has invested in the plant.

The main sticking point, he told Dawn in an interview, “is that the Japanese carmakers are seeking to nullify the EV policy advantages to Chinese manufacturers by demanding the same deal for their hybrid vehicles as given for the electric cars. That is not desirable because hybrid cars are basically gasoline engines; if that happens it can prove detrimental to the early adoption of EV technology in Pakistan. Who will go for EV then? The EV policy will not work then because hybrid cars will be way cheaper than electric cars.”

His contention being that Pakistan would benefit more by leapfrogging from combustion engines to go directly to electrical motors ‘in the same way the government had prioritised mobile telephony coverage over laying landlines in rural areas. Once the picture over the hybrid car policy clears up, we will expand our plant capacity to add a range of electrical vehicles.”

Battery restrictions

He is also critical of excluding electric cars with bigger than 50kWh battery packs. “If you want to give incentives to smaller, affordable cars then you keep battery capacity restriction of up to 20kWh. There is no logic behind this decision of tying incentives with battery packs or fuel tanks of a car. It is becoming a barrier. Smaller batteries work where you have good infrastructure. At present we need larger battery packs so car owners could travel more kilometers in one charge. Moreover, you have to replace smaller battery packs more frequently, making electric cars costlier to maintain,” the MCM chief claims.

Some say the restriction on battery capacity above 50kWh is meant to protect the Japanese car manufacturers from EV competition. “The EV technology has evolved in the recent years and bigger, better quality cars and SUVs can do up to 500-600km in one charge,” an executive of a company planning to venture into EV car production points out. “The entry of such cars and SUVs could be a serious threat to the Japanese players in the market.”

Mr Hyder says the EV policy aims at encouraging affordable, small cars in the country although it will also make bigger cars like Audi’s e-tron much cheaper than it is at present. “They will bring bigger cars whether we give them incentives or not. There’s no price consideration at that level. We want to encourage smaller cars for those who want to graduate from motorcycles to cars priced at up to 1-1.2m. Chinese are bringing such cars.”

He rejects the criticism that the EV policy protects the Japanese assemblers. “What protection a Rs5m car needs against e-tron or any other expensive brand. “The hybrid car policy is work in progress. Nor am I confirming neither denying the talk about incentives. We have worked hard on EV policy and considered every aspect and remain hopeful of its success.”

Published in Dawn, February 7th, 2021

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

The ban question
02 Dec, 2024

The ban question

RENEWED talk about banning one of the country’s largest political parties shows nothing but the impoverishment of...
5G charade
02 Dec, 2024

5G charade

THE government’s lofty plans for the 5G spectrum auction are an insult to the collective intelligence of the...
Syria offensive
02 Dec, 2024

Syria offensive

AFTER several years of relative calm, the Syrian civil war has begun to heat up again, with Idlib-based rebel...
Flying ban reversal
Updated 01 Dec, 2024

Flying ban reversal

Only the naive can expect the reinstatement of European operations to help restore PIA’s profitability.
Kurram conflict
01 Dec, 2024

Kurram conflict

DESPITE a ceasefire being in place, violence has continued in Kurram tribal district. The latest round of bloodshed...
World AIDS Day
01 Dec, 2024

World AIDS Day

IT is a travesty that, decades after HIV/AIDS first perplexed medics, awareness about the disease remains low in...