| Welcome to Global Village Space

Saturday, June 10, 2023

The future of hybrid electric vehicles in Pakistan: is it feasible?

Hybrids are all the rage in current times, but is the price premium worth the fuel savings considering Pakistan's economic instability?

Print Friendly, PDF & Email

As the prices of petrol and diesel-powered vehicles continue to rise and become unaffordable for many Pakistanis, hybrid electric vehicles (HEVs) have emerged as a potential solution. With one assembler already launching a hybrid SUV and another gearing up to roll out its own version, the question arises: does it make sense to buy a Pakistani-assembled pricey HEV for its fuel-saving aspects in comparison to petrol or diesel-driven vehicles?

Ill-timed launch amidst difficulties

The timing of launching locally assembled HEVs appears unsuitable in view of Pakistan’s uncertain economic situations and foreign exchange crisis. Moreover, the government is trying to save dollar outflow by squeezing demand for finished imported goods as well as those items on which raw materials are imported for local manufacturing.

Despite this, the government has given massive concessions to HEVs, including an 8.5% general sales tax (GST) compared to 25% on locally assembled gasoline-powered vehicles and 4% completely knocked down kits duty on HEV specific components like batteries and motors.

Read More: Toyota to launch its Hybrid vehicle

While these exemptions are substantial, the locally made hybrid SUV is more expensive than the gasoline version by 30% or Rs2.6m. Although the hybrid version has some additional specs, customers are likely to do a cost-benefit analysis and opt for the gasoline version due to the price difference.

International v/s national

Globally, hybrids usually carry a price premium of 8-10%, but this is not the case in Pakistan despite massive concessions. Moreover, customers will have to spend Rs2.6 million upfront to get the hybrid version, and if we compare the cost of driving a hybrid electric vehicle to a gasoline vehicle, the hybrid vehicle is more expensive. The hybrid vehicle will only start to save you money after 10 years of driving it, based on the current petrol price and average fuel efficiency.

Why is the government providing hefty concessions for HEVs in a struggling economy? Despite the desire to keep up with other countries, it may not make economic sense as it costs more to make a localised HEV or EV than the total fuel savings it will result in. Additionally, the Pakistani market is different from developed countries where customers have higher purchasing power.

Read More: Pakistan exports first locally assembled vehicle

Moreover, the government’s approach to incentivizing HEVs and EVs seems to be shortsighted, as it is not based on a comprehensive plan for reducing Pakistan’s reliance on fossil fuels or transitioning to a sustainable transportation system. Instead, it appears to be a knee-jerk reaction to the rising prices of petrol and diesel-powered vehicles and an attempt to appease a small segment of society that can afford HEVs and EVs.

What can be done?

If the government wants to promote sustainable transportation and reduce Pakistan’s reliance on fossil fuels, it needs to take a more holistic approach. This could include investing in public transportation, promoting non-motorized transportation like cycling and walking, and incentivizing the use of electric bicycles and motorbikes, which are more affordable and accessible to a wider segment of society.

Moreover, the government should encourage research and development in renewable energy and energy storage technologies, which could lead to the development of more affordable and efficient HEVs and EVs in.