Last time in this column we talked about the possibility of seeing electric cars in Pakistan should the right investments come in place (read: “Is Pakistan ready for electric cars?” published on July 31, 2017). But the question is, why we need electric vehicles and is there even a demand for such technology in the country which is only now opening up to new car ventures and a greater variety of models.
Electric vehicles are being called pollution shifters around the world—moving from dependence on oil and diesel to electricity. In fact, UK recently announced its plans to ban the sale of new petrol and diesel cars by 2040 followed by similar plans from France, Germany and Norway. India plans to become an electric vehicle nation by 2030 while China, though hasn’t made any promises to the effect is currently the largest market for electric vehicles with the government subsidizing as much as 60 percent of the costs and aiming for a 10-fold increase in sales by 2025. So what is this frenzy really about?
A Bloomberg report estimates that by 2040, new electric vehicles will constitute 35 percent of all sales. A major motivator for countries shifting to electric vehicles is the carbon emissions savings, lower dependence on expensive oil and gas; and the need to become environmentally clean, but long term costs may have something to do with it as well.
The same Bloomberg report estimates that by 2022, electric vehicles will cost the same as the traditional internal combustion (ICE) engine fitted cars which will be the point of liftoff for electric car sales. That is perhaps a function of demand-supply. Car and tech companies are making hefty investments to bring new low-range electric vehicles in emerging markets; some of these cars will cost less than their ICE counterparts as early as 2022.
Tesla was the first to come, but Chevy, Nissan, Mercedes-Benz and others have joined the bandwagon. In fact, only the past year, electric vehicle and battery prices have significantly fallen. The appetite for cars in Pakistan is no doubt picking up and consumers are looking for more efficient, better performing and better looking cars all the time. If you build it, will they not come?
But for electric vehicles to kick off in Pakistan the government will have to offer incentives and manufacturers must be ready to operate at low margins. Government incentives should go to investors willing to put in money not just in manufacturing electric vehicles but also charging stations. We have seen the private sector invest in the energy industry in anticipation of the energy demand, so setting up the infrastructure—which includes not just charging stations but also the smart grid—for electric vehicles is not impossible, but is in fact a business opportunity.
This is why Nishat with Hyundai want to bring hybrid cars and/or electric cars to Pakistan and other car makers have shown similar interest. The problem comes down to the electricity issue. True, the government has promised zero load shedding over the next five years but transmission and distributions in the country are wanting. The country still does not have the infrastructure to transmit and distribute electricity efficiently, and not much is expected to change in that area.
Any major upheaval in the electric vehicle market will have to be coordinated with a major overhaul in the transmission and distribution system. There will also have to be a lot more investment in capital intensive renewable and nuclear energy projects to not offset the gains from tailpipe emission that electric vehicles will achieve.
It is true that Pakistan is not a major pollutant so reducing carbon emissions is not a selling argument to encourage electric cars. Meanwhile, the energy crisis is still one of the biggest concerns for the economy. But that should not stop us from dreaming—surely, there is no rent on that.
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