Will Pakistan be able to embrace EV revolution?

Air pollution is enough reason to embark on path to change that will save lives

ISLAMABAD: Year 2020 is the year of electric vehicles (EV). Almost all manufacturers of petrol and diesel autos are racing to switch over to this new technology.

It could be an all-electric vehicle (AEV) or a plug-in hybrid electric vehicle (PHEV), which uses a combination of plug-in charging and petroleum-based fuel.

Over 30 new models are being launched this year. One reason for this is the inefficiency of petrol and diesel engines as 70% of the input energy in such engines goes to waste. But several other factors are also driving this change.

Several countries have introduced legislation for much stricter carbon emissions and have also set target dates to stop the sale of new petrol or diesel cars.

Norway aims to achieve this target by 2025 while others are eying 2040. China and India are targeting to have 100% electric vehicles by 2030. In fact, India is planning to convert all two and three-wheelers over the next five years.

In terms of brands, the United States-based Tesla, which launched its all-electric car in 2008, is currently in the lead and this week made its one millionth car. It is hoping to make another million cars – and trucks – by 2022.

Besides the US manufacturing facility, it has also built a multibillion-dollar plant in Shanghai and is planning another one in Germany.

German auto giant Volkswagen Group is investing more than $66 billion to produce 50 models of purely electric vehicles by 2025 and is currently in the second place behind Tesla.

Changeover in Pakistan

Following the international trend and to reduce carbon emissions and smog cover over major cities of Pakistan, the Ministry of Climate Change announced an innovative electric vehicle policy in November 2019 with several tax concessions to incentivise the changeover.

These concessions include reduction of customs duty on built-up new cars to 25%, on completely knocked down (CKD) kits to 10% and on charging stations to 16%.

Even with these concessions, the target is for electric cars to have 30% share in overall sales over the next 10 years. The government expects the changeover to result in considerable savings in the oil import bill, a reduction in pollution levels and creation of hundreds of thousands of new jobs. The new policy was widely welcomed in the country and was considered a major achievement of the current government. Several well-known international automakers including Audi, BMW, Hyundai, Nissan and Renault have reportedly shown interest in producing electric cars in Pakistan.

Moreover, some local groups expressed interest in this opportunity and started teaming up with major international manufacturers to assemble electric cars locally.

These include Karakoram Motors in association with Dynasty Electric Car Corporation of Canada, Rehmat Group teaming up with the Chinese BYD, Master Motors with the Chinese Chongqing Changan Automobile Company, Zenith with Jinbei group of China and Al Haj Faw Motors with Proton of Malaysia.

Stumbling blocks

But as with most other undertakings, there are major hurdles in the way. Soon after the announcement of the new policy, it started facing opposition from the long-established players who have so far monopolised the local market.

They were joined by the recent entrants who had started setting up non-electric car assembly units after the announcement of tax incentives through the Auto Industry Development Policy (AIDP) of 2016.

Then there is the turf war between the Ministry of Industries, which has long been protecting the existing players, and the Ministry of Climate Change, which is promoting electric vehicles.

It will be a major challenge to achieve the change but the technology, whose time has come inevitably, gets adopted. The government has to realise that reducing air pollution is enough reason to embark on the path to this change.

Transport sector is the biggest air polluter in Pakistan, accounting for 43% of the total. Over 300,000 people die each year due to poor air quality. If the country’s cities and lives are to be saved, urgent steps are needed to reduce the use of fossil fuels.

The existing auto industry and its backers are also to realise that when other car-producing countries such as India, Turkey and Thailand had started implementing the new World Trade Organisation (WTO) rules on localisation in the 2000s, Pakistan was the only one opting not to adjust its policies to this changing global trend.

Those who adopted the new rules saw their industry flourish. Although Pakistan was among one of the first developing countries which started assembling cars in the 1950s, due to its inward-looking policies, it has been left far behind its competitors. It has another opportunity and should not dither in adopting this technology. As HG Wells about a century ago said, “Adapt or perish, now as ever, is nature’s inexorable imperative.”

The writer served as Pakistan’s ambassador to the WTO from 2002 to 2008

 

Published in The Express Tribune, March 16^th, 2020.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.