Is there promise for EVs in Pakistan? The short answer is yes. For potential, look at Pakistan's motorcycle market it is the fifth largest in the world after China, India, Indonesia, and Vietnam, with over 6,000 daily new sales. A staggering 53% of all households have two-wheelers. Passenger car sales have also been soaring at over 20% yearly growth until recently. Pakistan has however been practically non-existent in the EV space so far.
Among other factors, Pakistan's EV policy was prompted by Pakistan's dubious distinction of being the world's second most polluted country, with Lahore, Karachi, Faisalabad, and Gujranwala among the top fifteen most polluted cities. Resultant health and other ripple effects have cost the state dearly. The policy is a positive step towards tackling these issues while simultaneously enhancing energy security through a reduction in transport fuel imports.
This article focuses on gasoline (petrol) replacement, not covering diesel substitution, as E- buses/trucks are currently not price competitive. Another five years however and we could well be on the EV bus route as well.
To put EVs in a global perspective, in 2019 out of 1.4 billion cars' stock worldwide, 0.5% were fully electric/plug-in. Though a tiny number, the growth rate has been significant - 40% year on year. What has resulted in EVs becoming comparatively more common place? In the developed countries a concern for climate change along with the rapid rise in city pollution has led to favorable EV policies, translating into handsome subsidies albeit with tightening emission standards - a carrot and stick approach. Pakistan not being able to offer direct subsidies has rationally chosen a route which lowers taxes across the EV supply chain.
Rapidly decreasing EV costs (particularly batteries, which are 40% of an EV's cost), increasing driving range and reducing charging times are becoming key enablers of the rising EV tide. However, EV market growth requires many other actions by many different players. Let us look at some other important enablers.
Addressing consumer behaviour - deeper understanding of consumer behaviour is crucial in evaluating various avenues for the EV market. What are key customer attributes? Is it just price or payback or total cost of ownership? EV's high initial price and low operating cost, is often perceived as less attractive than lower initial cost but higher operating cost, even with similar economic impact.
Customer attributes needing focus include brand loyalty, choice of variants, comfort, gadgetry, convenience/reliability, range, time and access to charge, availability of mechanics, reliable electric load, charging cost, and safety. Customer path dependence (persevering with what one has) also needs addressal. Well thought out communication methods with the customer therefore assume importance.
Note that more than 50% of our current gasoline consumption is by two and three wheelers with a large existing stock of over 20 million. So, their conversion will hold the key. Pakistan's EV policy resultantly focuses on 2 and 3 wheelers. Understanding diverse customer demographics and mobility behaviour is therefore important, needing granularity in data collection and analysis - currently we lack quality data.
Charging points access - Optimum location and density are critical for rapid EV introduction. A good benchmark for say Karachi is 100-150 charging points per million people. At least 10 - 20% of available public charging should be fast charging. Such investments will require a long-term approach the break-even period being long, as vehicle traffic will build up slowly. So, the question is who will develop EV charging stations oil marketing companies, electricity distribution companies, car manufacturers or independent charging companies? Or a combination of the above?
Governance - It can be a vague term meaning different things to different stakeholders. Do concerned government organizations have clear responsibility, ownership, authority, institutional capability and accountability to drive this change? Are they capable of assessing the trade-offs between urgency and compliance? Which GoP units will take ownership - provide standards, monitor progress, conduct audits and if necessary, impose penalties? GoP's holding power, resolve, and continuity of policies are also crucial to success. Furthermore, governance is just not the sole responsibility of GoP but must extend to all stakeholders.
Electric grid infrastructure - With EVs the electric grid will be under some pressure post 2030 primarily due to transmission constraints. Karachi's load due to EVs is expected to increase by 20% by 2040s - a manageable figure. A smart, flexible, reliable, digitalized grid will nevertheless become essential. Electricity distribution companies will need greater agility - a difficult order, without proper entity restructuring. As GoP's intent is to save on fuel import, primarily using renewable electricity to charge EVs would be ideal and eventually essential, though that route comes with its own challenges.
Other enablers - Some other key ones include an international auto player's entry Honda, Toyota, or Suzuki. Chinese car manufacturers are however in no way lagging in this space; as Forbes magazine recently put it, "Chinese Electric Cars Will Take Over The World - If We Let Them".
So, very challenging yet exciting times ahead for key stakeholders GoP, manufacturers, utility companies, potential EV charging entities and suppliers. However, GoP's role is pivotal in this space. Meaningful data gathering and analysis, involvement of all stakeholders, prompt identification and rectification of bottlenecks, clear departmental responsibilities, promotion of enablers, review of unintended consequences, ensuring compliance, avoiding unrealistic promises and above all sincere facilitation and a quest to learn, come to mind. And so almost as always, the devil is in the details.
(The writer has taught energy economics and policy at Cornell University and Berkeley. The views expressed in this article are not necessarily those of the newspaper)
Copyright Business Recorder, 2020