There has been a lot of debate on electric vehicles on how they are good for the environment and can help Pakistan reduce its reliance on expensive imported fuel.
We take a look at the EV technology from a consumer’s perspective as to what the payback will be for a customer if he/she chooses to buy any of these electric vehicles which are really expensive at the moment.
Within electric vehicles, there are Hybrids, Plug-in Hybrids, and pure Battery Electric Vehicles, each having a price premium over comparable ICE (Internal Combustion Engine) vehicles.
The price premiums vary from up to 20% in Hybrids, up to 30% in Plug-in Hybrids due to their larger battery size, and over 40% in the case of Battery Electric vehicles.
Let’s take a look at the payback for Hybrids and Battery Electric Vehicle for a common customer in Pakistan.
As opposed to claimed mileage or fuel efficiency by any manufacturer which is usually tested under ideal conditions, one must look at the real-life actual fuel average that any customer achieves in daily usage of his/her vehicle on our roads under local climate and traffic conditions.
It’s important for customers as well as policymakers to understand the difference between “claimed vs actual” in order for them to make an informed buying decision when it comes to such an expensive purchase.
As per our study, the payback period for Hybrid and other Electrified vehicles is over seven years and over 200,000 KM, which is shocking keeping in view that such vehicles are being sold to customers in the name of efficiency.
Yes, the operating cost per KM seems relatively lower but the upfront cost of ownership dilutes the operating cost advantage.
Usually, the first buyer keeps a new vehicle anywhere between 3 to 5 years and sells it off before it to the second buyer before it hits 120,000 KMs, so it’s pretty obvious that the first buyer will not get any advantage whatsoever for opting to buy an electric vehicle.
No wonder, Electric and Hybrid Vehicles are being bought by only the elite segment customers in Pakistan and it’s not being adopted by an average customer.
First-world countries, or countries with a higher renewable energy mix, can afford to subsidize such expensive vehicles making their upfront cost lower, however, countries like Pakistan cannot afford to subsidize the purchase of such luxury vehicles which doesn’t give quick economic returns and ends up weighing adversely on the foreign exchange.
In a country like Pakistan – which is struggling with high imports that exceed $ 70 billion, and where over 65% of our electricity is generated from fossil fuels – it doesn’t make sense for the government to provide duty or tax concessions to such expensive technologies like Hybrids and Electric Vehicles whose payback is as high as over 7 years.
Currently, the government is providing duty and tax concessions to electrified vehicles ranging from Rs. 900,000 per unit on Hybrids to over Rs 2 million per unit approximately on Battery Electric Vehicles in the shape of reduction in customs duty and GST.
The specific components of such vehicles like Battery, Motor, and Controllers will continue to be imported into Pakistan and will add to our import bill without giving us any quick returns on account of fuel savings.
On the contrary, the country would have to spend much more $/foreign exchange to import these expensive technologies upfront. It’s just a matter of time before such imports start adding to our import bill in the next few months therefore the government must take corrective policy decisions now before it’s too late.
Besides, only the elite can afford to buy such vehicles costing over PKR 7~8 million, so why would the government want to give subsidy to the elite segment of our society when it’s banning all sorts of luxury imports?
Hybrid Vehicle Payback over 7 years:
Battery Electric Vehicle Payback (Commercial Tariff) over 10 Years:
Battery Electric Vehicle Payback (Residential Tariff) nearly 7 Years:
