In Pakistan, the Economics of Electrified Vehicles and the Return on Investment for Customers

We examine EV technology from the standpoint of a customer, determining what the return will be if he or she purchases one of these currently prohibitively priced electric vehicles.

There are three types of electric vehicles: hybrids, plug-in hybrids, and pure battery-electric vehicles, all of which cost more than equivalent ICE (internal combustion engine) automobiles.

Electric cars have a payback time of over 7 years or 200,000 kilometers.

Hybrids have a price premium of up to 20%, Plug-in Hybrids have a price premium of up to 30% owing to their bigger battery capacity, and Battery Electric cars have a price premium of over 40%.

We examine EV technology from the standpoint of a customer, determining what the return will be if he or she purchases one of these currently prohibitively priced electric vehicles.

There are three types of electric vehicles: hybrids, plug-in hybrids, and pure battery-electric vehicles, all of which cost more than equivalent ICE (internal combustion engine) automobiles.

Electric cars have a payback time of over 7 years or 200,000 kilometers.

Hybrids have a price premium of up to 20%, Plug-in Hybrids have a price premium of up to 30% owing to their bigger battery capacity, and Battery Electric cars have a price premium of over 40%.

Let's look at the payback for Hybrids and Battery Electric Vehicles for a typical Pakistani consumer.

Rather than looking at a manufacturer's advertised mileage or fuel-efficiency, which is normally evaluated under ideal settings, one should look at the real-life actual fuel average that every customer obtains in daily driving on our roads under local climate and traffic conditions.

It's critical for buyers and legislators to grasp the difference between "claimed versus actual" in order to make an informed purchasing decision on such a costly item.

According to our research, the payback period for Hybrid and other Electrified cars is more than seven years and 200,000 kilometers, which is alarming given that these vehicles are offered to customers in the name of efficiency.

Although the operating cost per kilometer appears to be cheaper, the upfront ownership cost dilutes the operational cost-benefit.

Typically, the first buyer retains a new car for 3 to 5 years before selling it to the second buyer before it reaches 120,000 kilometers, so it's clear that the first buyer will not benefit in any way from purchasing an electric vehicle.

It's no surprise that in Pakistan, electric and hybrid vehicles are exclusively purchased by the wealthy, and they are not widely accepted by the general public.

First-world countries, or countries with a higher renewable energy mix, can afford to subsidize such expensive vehicles, lowering their upfront cost; however, countries like Pakistan cannot afford to subsidize the purchase of such luxury vehicles, which do not provide quick economic returns and end up negatively impacting the foreign exchange market.

In a country like Pakistan, where imports exceed $70 billion and over 65 percent of electricity is generated by fossil fuels, it makes no sense for the government to offer duty or tax breaks to such expensive technologies as hybrids and electric vehicles, which have a payback period of over seven years.

Currently, the government offers duty and tax breaks to electrified cars ranging from Rs. 900,000 per unit for Hybrids to over Rs 2 million per unit for Battery Electric Vehicles in the form of customs duty and GST reductions.

Specific components of such cars, such as batteries, motors, and controllers, would continue to be imported into Pakistan, adding to our import cost without providing any immediate savings in terms of fuel.

On the contrary, importing these high-cost technologies would need a far higher initial investment in terms of dollars and foreign currencies. It's just a matter of time until such goods begin to contribute to our import costs in the coming months, therefore the government must make policy changes now before it's too late.

Furthermore, only the wealthy can afford such automobiles, which cost above PKR 78 million, so why would the government want to provide a subsidy to the wealthy when it is prohibiting all luxury imports?

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