Electric Vehicles as Potential Solutions to Pakistan's Fossil Fuel Reliance?

Pakistan is making strides towards a greener future, with a focus on electric vehicles (EVs) as the key to reducing air pollution and decreasing reliance on fossil fuels. However, the journey is not without its challenges.

Khalid Waleed, a research fellow at the SDPI, has emphasised the importance of retrofitting schemes that install EV capabilities on old motorbikes at low cost to accelerate adoption. This could help Pakistan achieve its ambitious goal of having 30% of new vehicle sales be electric by 2030 and all new vehicles by 2050.

The NEV Policy 2025-30, a comprehensive plan to promote EVs, includes over PKR 100 billion in subsidies over the policy period. It also provides significant reductions in electricity tariffs for charging infrastructure. The policy is expected to reduce annual fuel use by over 2 billion litres.

However, the transport sector continues to be a significant contributor to air pollution in Pakistan's major cities. Lahore and Karachi rank among the world's most polluted cities, with the transport sector accounting for 35% and 33% of PM2.5 pollution respectively.

To combat this, the NEV Policy 2025-30 envisions the addition of 40 charging stations every 105 kilometres along highways. BYD, the world's largest electric car maker, plans to establish a USD 200 million local assembly plant in Karachi to be completed in 2026.

Yet, Pakistan is still actively investing in its fossil fuel infrastructure and oil and gas resources. The country has long-term LNG import contracts with QatarEnergy and Italy's Eni, and a USD 1.2 billion financing facility with the Saudi Fund for Development allows for the import of oil from Saudi Arabia on deferred payment for a year.

The IMF, however, has expressed concerns about sales tax concessions for locally sold EV parts, stating they could affect revenue generation and fiscal discipline.

Despite these challenges, there is hope that new funding from the IMF's Resilience and Sustainability Facility (RSF) could help build charging infrastructure through public-private partnerships.

It's important to note that the transition to EVs is not without its social implications. Road traffic pollution disproportionately harms the vulnerable, including children, the elderly, traffic police, roadside vendors, and drivers without air-conditioned vehicles.

In Pakistan, Karakoram Motors has engaged in manufacturing electric vehicles, taking over Dynasty IT's production. However, data on the exact number of electric vehicles produced in Pakistan for the year 2024-25 is not available.

The Petroleum Development Levy is expected to bring in PKR 1.47 trillion (USD 5 billion) in fiscal year 2025-2026, highlighting the significant role petroleum products continue to play in Pakistan's economy.

As Pakistan navigates this complex transition, it's clear that a balanced approach is needed, one that considers both the environmental and economic impacts of the shift towards sustainable transportation.

Electric Vehicles as Potential Solutions to Pakistan's Fossil Fuel Reliance?