Are electric cars also destined to go the ‘CNG route’?

Published June 5, 2022
KARACHI: A man plugs an electric vehicle into an ultra-rapid charger point installed at a filling station.—PPI/File
KARACHI: A man plugs an electric vehicle into an ultra-rapid charger point installed at a filling station.—PPI/File

With fuel costs rising to astronomical levels, there is a lot of buzz around electric vehicles these days; how good are they for the environment, can they help Pakistan reduce its reliance on expensive imported fuels, and — perhaps most importantly — what will be the benefit or ‘return on investment’ for the consumer who opts to invest in this expensive but environmentally-friendly technology?

Hybrids, plug-in hybrids and pure battery electric vehicles each have a price premium that far outstrips comparable vehicles with internal combustion engines. The price premiums vary from up to 20pc in hybrids, up to 30pc in plug-in hybrids (due their larger battery size) and over 40pc in case of battery-driven electric vehicles.

But in contrast with the mileage or fuel efficiency claims that any manufacturer puts forward — usually after testing the vehicle under ideal conditions — most buyers in the real world must look at factors such as actual fuel average on Pakistani roads, under local climatic and traffic conditions.

An auto industry insider told Dawn that customers as well as policy makers need to understand the difference between “claimed versus actual reality” so that the buyers can make informed decisions before expensive purchases.

He claimed that the payback period for hybrid and other electrified vehicles is well over seven years and over 200,000km, which may come as a surprise to many, especially given the fact that such vehicles are being marketed to customers under the banner of fuel efficiency and as an environmentally-friendly option.

While the per kilometre operating cost of these modern vehicles seems relatively lower given their lower fuel consumption, but the upfront cost of ownership dilutes this advantage.

Traditionally, first buyers tend to keep their vehicles anywhere between three to five years before selling it off, which is usually before it hits the 120,000km-mark. This means that the first buyer will technically not get any advantage for opting to buy an electrified vehicle, the insider said.

Electric and hybrid vehicles are mostly being purchased by those who can afford luxury cars, rather than the average customer, whose buying power can only manage locally-made petrol driven 660-1,000cc vehicles, he said.

The insider told Dawn that first world countries, or those with a higher renewable energy mix, could afford to subsidise such vehicles, making their upfront cost lower.

For example, the UK offers a plug-in grant for low emission vehicles, which subsidises their cost by anywhere between 500 to 1,500 pounds. Countries like Pakistan, however, cannot afford to subsidise the purchase of such vehicles since the economic returns take a long time to mature, besides putting a burden on the foreign exchange reserves, he said.

Pakistan is already struggling with higher imports exceeding $70 billion, while 65pc of our electricity is generated from fossil fuels. The auto industry insider said it did not make sense for the government to provide duty or tax concessions on such expensive technologies like hybrids and EVs.

The recently launched Rinco Aria, which runs on a lithium iron phosphate battery, has come forward as a cheaper alternative to big brands. At Rs2.4 million, the car is more affordable than other electric vehicles. However, it is too early to tell whether it will offer more value for money or fall prey to the same problems.

Currently, the state is providing duty/tax concessions to electrified vehicles ranging from Rs 900,000 per unit on hybrids to around Rs2 million per unit on battery electric vehicles in the shape of a reduction in customs duty and general sales tax.

The specific components of such vehicles like battery, motor, controllers, however, would continue to be imported, thus adding to the import bill, he said, urging the government to take corrective measures before the import figures of such vehicles swell to alarming levels.

The situation with electric two-wheelers is not much different.

Association of Pakistan Motorcycle Assemblers Chairman Mohammad Sabir Sheikh told Dawn: “If the government allows duty and tax free import of the 100cc-equivalent imported electric scooty, it will cost Rs150,000, while it will be priced at Rs225,000 after including import duty and taxes.”

He said the price of an electric scooty can be brought down to Rs130,000 if the government allows duty and tax free imports of its parts and accessories for local assembly.

Consumers who were once quite pleased with the fuel savings offered by hybrid and electric vehicles have seen a sea-change. Software engineer Bilal Saleem, who purchased a 2018 model Toyota Aqua Hybrid for Rs1.6 million, said it gives him a mileage of 15-16kms.

Although this is still better than most inefficient petrol engines can manage, according to Mr Saleem, the massive upfront cost and the expensive parts make it a losing bargain.

“I will prefer a petrol-driven car over a hybrid if I ever change my car, because the latest model of the Aqua, even a second-hand one, will cost around Rs5.5m,” he added.

He said that even a used lithium battery costs between Rs300,000-400,000, while the cost of a new model is beyond his reach.

CNG flashback

This situation may be familiar to those who saw the hey-day of compressed natural gas (CNG) vehicles in the late 90s and 2000s.

In its day, CNG mania swept the country as natural gas was touted as a cheaper and more plentiful alternative to petrol and diesel fuel.

CNG was launched with much fanfare as an environmentally-friendly fuel to ensure 40-50 per cent savings as compared to petrol. Although it saw a boom through the first decade of the new millennium, things started to go south from 2012, when the apex court changed the costing structure of natural gas.

Since then, the CNG sector has been struggling for survival and over the last two years, the crisis has only deepened given the shortages of natural gas, leading to the compulsion of importing expensive LNG to meet domestic and industrial needs.

All Pakistan CNG Association Vice Chairman Samir Najmul Hussain told Dawn that their Rs 400bn investment in land acquisition, equipment and infrastructure development in 2005-2006 has nearly been wiped out.

Commenting on the future of electric vehicles, Mr Hussain said “We cannot get so excited right now, amid the lack of infrastructure, lingering threat of power shortfall, non-fixing of power tariffs etc.”

Hybrid and plug-in hybrid vehicles can be the future, but rising prices would emerge as a big issue even if such vehicles are made locally in Pakistan, he said.

Published in Dawn, June 5th, 2022

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