The Economics of Electrified Vehicles in Pakistan and Their Payback for Customers

Electrified Vehicles have been the subject of much debate. They are both good for the environment, and can help Pakistan reduce its dependence on imported fuel.

We examine the Electrified Vehicles technology as a consumer’s viewpoint to see what the return on investment will be for a customer if he/she decides to purchase any of the electric vehicles that are very expensive right now.

There are three types of electric vehicles: Hybrids and Plug-in Hybrids. Each has a higher price than comparable ICE (Internal Combustion engine) vehicles.

Prices can vary between Hybrids and Plug-in Hybrids. They are up to 20% higher than Hybrids, while Hybrids are up to 20%, and Plug-in Hybrids up to 30%. Battery Electric vehicles cost more.

Let’s look at the payback on Hybrids or Battery Electric Vehicles for a common customer from Pakistan.

Instead of focusing on claimed fuel efficiency or mileage by any manufacturer, which are usually tested under ideal conditions in most cases, it is important to look at actual fuel consumption that customers achieve daily under local conditions and traffic conditions.

Customers and policymakers need to be able to tell the difference between “claimed” and “actual” so they can make informed purchasing decisions when making such a large purchase.

Our study shows that Hybrids and other Electrified Vehicles have a payback period of over seven years, and more than 200,000 KM. This is quite shocking considering the fact that these vehicles are sold to customers for efficiency.

Although the operating costs per KM seem lower, upfront ownership costs dilute the operating cost advantage.

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It doesn’t make economic sense for the government in Pakistan to impose duty or tax concessions on expensive technologies such as Hybrids and Electric Vehicles, whose payback can be as high as 7 years.

The government currently offers tax concessions and duty exemptions for electrified vehicles, ranging from Rs. Hybrids: Rs.900,000. Battery Electric Vehicles: About Rs. 2 Million per Unit. This is in exchange for a reduction in customs duties and GST.

Specific components such as Motor, Battery, and Controllers will be imported into Pakistan. This will increase our import bill and not provide us with any quick returns due to fuel savings.

To import expensive technology upfront, the country would need to spend more $/foreign currency. It is only a matter time before these imports begin adding to our import bill within the next few months. Therefore, the government should take corrective policies decisions now, before it is too late.

Moreover, these vehicles are only available to the elite who can afford them. So why would the government give subsidies to this elite section of society while it bans all luxury imports?