The government is likely to amend Auto Development Policy 2016-21 to include Electric Vehicles (EVs) after the Prime Minister Imran Khan directed the authorities concerned to ensure conversion of 30 percent of all cars running in the country into electric vehicles by 2030. The PML (N) government in its federal budget 2018-19 had reduced customs duty on the import of electric cars from 50 percent to 25 percent, in addition to exemption from 15% regulatory duty, and fixing import duty at 10 per cent on CKD.
According to working paper discussed during a meeting with the Prime Minister, Pakistan has to endure a substantial cost in the form of bill for oil imports for its transport sector. Presently, Pakistan imports oil worth $ 13.3 billion which is expected to rise to $ 30.7 billion by 2025, if Pakistan''s transport sector continues to expand at the present rate.
The world is fast moving towards an electric mobility revolution. Some countries went as far as to announce plans to completely halt the sale of Fossil Fuel Vehicles (FFVs). Norway plans to ban sale of all FFVs by 2025, Netherlands plans to ban such sales by 2030, while France and UK plan to do the same by 2040. Other countries such as China, Germany, Sweden and many US States have announced ambitious plans for Electric Vehicle (EV) penetration in their respective locales.
While EVs have been around for many years, many experts see the governmental policies as a trigger for mass adoption of EVs. Even developing countries like India have announced to increase their share of EV sale to 30 percent and completely shift to all electric buses by 2030. India also plans on establishing a huge charging infrastructure with at least one charging facility available in each 3x3 km block in cities and every 25 km along both sides of national highways.
The EV penetration around the globe is less than 10 million vehicles as of 2018. However, this market is set to grow to as much as 220 million by 2030. It is important for Pakistan to tap into this market on priority. Not only will it solve the local problems of environment and surging oil import bill but it can also be an excellent opportunity for exports. Moreover, electric vehicles are an excellent flexible load for the national electric grid. With right planning, EVs can use the electricity in off-peak hours and reduce the burden of idle capacity payments on the national exchequer.
A three phase penetration targets have been submitted to the federal government for Electric Vehicles. These phases include the following: (i) market development and public awareness through incentives and subsidies on electric vehicles, (years 1 and 2); (ii) fuel import bill substitution through targeted penetration of electric vehicles through local assembly and manufacturing (years 3 and 4); and (iii) reasonable local adoption and export of electric vehicles and its components through indigenous research, development, assembling and manufacturing (years 5 and beyond).
The phase 1 of the EV penetration in Pakistan''s market is not possible without government support. EVs still cost much higher than their FFV counterparts and governments around the world give subsidies, incentives and tax breaks for EV adoption amongst the masses. These initial incentives, tax breaks and benefits will pay for itself with the savings in fuel import bill, reduction in emission related expenses, usage of idle electricity capacity and charging revenues. For example, with the target penetration the country will conservatively get more than Rs 110 billion yearly through savings and earnings.
For most part, electric vehicles are not covered by the Auto Policy 2016-21 of Pakistan. The policy and subsequent incentives are related to all-battery operated vehicles that do not contain internal combustion engine and are run solely through the available on-board battery charge. Due to the new innovations taking place in the field of electric mobility it is important to revise the existing policy for any new incentives for new technologies not covered. While all the incentives in the policy will be intact, new incentives for newer technologies may be added in revisions. This policy document will become part of the next Auto Policy 2021-26, the document notes.
Earlier this year, the Auto Development Committee (ADC) considered a proposal about incentives for the electric vehicles but the existing auto industry opposed unrestricted incentives to electric vehicles as investors may misuse the incentive.
The FBR and the Ministry of Finance would work in conjunction to implement a planned reduction on taxes and duties for EVs. There is also a need for a policy that incentivises EVs through limiting registration cost, import duties and yearly token tax. Some of the incentives would fall under the purview of provincial ministries of revenue. Therefore, the policies of provincial ministries must also follow the overall EV policy framework.
The role of Discos, Karachi Electric, PSQCA, Ministry of Commerce, Ministry of Industries and Production, Ministry of Climate Change, Ministry of Communication, Ministry of Foreign Affairs, Planning Commission, provincial government, Metropolitan Corporations/Development Authorizes, Nepra and banking sector has been termed important in this regard.
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