EV based Logistics
EV based Logistics
Business Model Description
Invest in setting up a new nationwide sustainable freight forwarding company or scaling up an existing network using emission-free transport vehicles or scaling up an existing freight forwarding company using the B2B model; transferring goods from farm to factory or through a B2C model; transferring goods from retailers and customers.
Companies can also develop freight forwarding channels that offer services to connect different modes of transportation and operators for both passengers and freight logistics - for instance, ride-sharing services, mobility as a service, logistics management platform and the like - and generate revenue from the service fees. Examples of companies active in this space are:
DHL has introduced emission friendly forwarding by GoGreen solutions that create transparency, optimize carbon footprint and offset carbon emissions.
DHL's Sustainable Development Model aims to apply sustainable management practices to transform businesses and challenge the status quo by turning sustainability into an integral component of Supply Chain Management (SCM). This is a key factor in a company’s success. Thus, to generate high returns, DHL has increased its investment in Pakistan and has invested ~USD 8 million recently. (9)
Expected Impact
Reduction in carbon emissions and fuel import bill by switching transportation dependence from oil to clean energy.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Pakistan: Punjab
- Pakistan: Sindh
- Pakistan: Khyber Pakhtunkhwa
- Pakistan: Balochistan
Sector Classification
Transportation
Development need
Due to 2022 floods, transport and communication sector has faced a damage of USD 3,264 million and a loss of USD 281 Million and has recovery needs of USD 4,994 Million. (1) Affordable and accessible logistic solutions will reduce the transport cost of inputs, produce and farm to market access and distribution costs otherwise it can decrease profit margins by 4 percent. (2)
Policy priority
Strategic Trade Policy Framework highlights logistics, transport and distribution as developmental sectors that will support the growth of all sectors. Policy aims to identify and resolve the issues that hinders domestic commerce which includes transportation, supply chain issues among others (3)
Gender inequalities and marginalization issues
Failure to include women’s needs and voices in transport design, planning and operations is a missed opportunity to build back better and accelerate action towards gender equality and the Sustainable Development Goals (SDGs). In the field of public transportation, safety concerns disproportionately affect women without access to a vehicle, and often women who work low income and hourly jobs (4). Additionally, women face challenges when using transportation to access markets as a part of a business supply chain and as a distributor as well since it impacts their travel patterns and transport modes. (5)
Investment opportunities
the sector was providing jobs to 3 million people and the same is expected to rise more than ever. The sector is getting 25-30 percent share of the annual public sector program (PSDP-2019) but concerted efforts are required to promote public-private partnership for leveraging higher investments from the private sector. (6)
Key bottlenecks
Pakistan ranks 142 (out of 160 countries) in World Bank’s Logistics Performance Index (LPI). Primary bottleneck for investors is the country's poor performance in custom clearance, tracking, tracing and timelines through our country which impacts future investments in logistics solutions.
Land Transportation
Development need
There are 500,000 registered trucks in Pakistan and majority are obsolete old vintage trucks with rigid suspensions with limited speeds and fuel and cost inefficient. This increases risk of road accident, spoilage and damage to roads, bridges and highway which gives 2 percent loss to GDP on average. There is need to shift to green, clean and reliable logistics. (6)
Policy priority
Pakistan launched its first policy National Freight and Logistics Policy in 2020. The policy that responds to the inability of the country’s freight and logistics system to meet the demand for goods transport and associated supply chains, at competitive prices and adequate service levels in terms of both quality & reliability. (6)
Gender inequalities and marginalization issues
Most women in the world find it harder to travel than men. As a result, they have fewer opportunities, and when they do travel, they face more mobility barriers than men in accessing and using transport. Women's work force participation is already, 10 percent over 20 years. One of the reasons of this low participation is lack of safety in transit to schools, workplaces and business opportunities (7)
Investment opportunities
In 2019 the transport and capital equipment were 22 percent import bill value, investment opportunities are in manufacturing in Pakistan. (3) Pakistan has investment potential in areas like supply chain management (warehousing and cold chain logistics) and transportation (air freight and trucking, urban transport, intercity transport). (8)
Key bottlenecks
Bottlenecks in investment in EV for logistics include issues at an ecosystem level: unavailability of adequate charging infrastructure, risk of grid overload and high carbon grid profile but with using smart and flexible charging stations, smart energy management by effective load management, battery monitoring and analytics and recycling. (6)
Road Transportation
Pipeline Opportunity
EV based Logistics
Invest in setting up a new nationwide sustainable freight forwarding company or scaling up an existing network using emission-free transport vehicles or scaling up an existing freight forwarding company using the B2B model; transferring goods from farm to factory or through a B2C model; transferring goods from retailers and customers.
Companies can also develop freight forwarding channels that offer services to connect different modes of transportation and operators for both passengers and freight logistics - for instance, ride-sharing services, mobility as a service, logistics management platform and the like - and generate revenue from the service fees. Examples of companies active in this space are:
DHL has introduced emission friendly forwarding by GoGreen solutions that create transparency, optimize carbon footprint and offset carbon emissions.
DHL's Sustainable Development Model aims to apply sustainable management practices to transform businesses and challenge the status quo by turning sustainability into an integral component of Supply Chain Management (SCM). This is a key factor in a company’s success. Thus, to generate high returns, DHL has increased its investment in Pakistan and has invested ~USD 8 million recently. (9)
Business Case
Market Size and Environment
> USD 1 billion
10% - 15%
Supporting operations of SMEs by connecting 65% SME from Punjab to other areas (10)
Revenue is expected to grow at 11.93 percent CAGR during 2023-2027, resulting in a projected market volume of USD 4.52 billion by 2027. (2) Supporting operations of SMEs by connecting 65% SME from Punjab to other areas (10)
Indicative Return
> 25%
Small and Medium Enterprise Development Authority's (SMEDA) pre-feasibility study estimates that IRR for a freight forwarding company is 50 percent. (11)
Maximum number of SMEs are based in Punjab, i.e., 65 percent. The business model provides an opportunity to connect these SMEs with other enterprises and customers across the country at affordable rates, and environment friendly options for logistics.
Investment Timeframe
Short Term (0–5 years)
SMEDA's pre-feasibility study estimates that the payback period for a freight forwarding company is 3.1 years. (11)
The first year would be required in setting up physical space, store house, human resources and developing a client base, while in year two and three the business will run its operations. (11)
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
Transport sector emits 28 percent of Pakistan's total Green House Gas (GHG) making it the second sector after power having highest emission. Since it is a priority sector for investment there is a need to ensure the investments are made in sustainable logistics to curb the GHG emissions. (14)
In the logistics sector, there is a need for affordable freight solutions to support farm to market transfer of goods in a cost effective and efficient manner to ensure optimal market access for farmers and customers to get their products within a competitive turnaround time.
Gender & Marginalisation
There is a dire need of a competitive, affordable and accessible freight forwarding market. Women farmers, manufactures and entrepreneurs already face financing and accessibility challenges. (15)(16)
Only 20 percent women in Pakistan contribute to the work force due to unavailability of resources and limited access to safe transit options. Affordable rates charged by EV based logistic agencies can help address such issues and reduce the cost of doing business. (5)
Affordable and accessible logistic solutions will reduce the transport cost of inputs, produce and farm to market access and distribution costs otherwise it can decrease profit margins by 4 percent. (10)
Expected Development Outcome
With foreign or local investment for a national network of an efficient freight logistics fleet, it is expected that the cost of transporting goods will be reduced thereby benefitting businesses and consumers with direct impact on the GDP.
Reduced emissions due to transition from fuel based to electric logistic vehicles will allow the country to meet its target of reducing reliance on carbon heavy energy sources.
Gender & Marginalisation
Increase in accessibility and decrease in cost of transportation for women led SMEs.
Primary SDGs addressed
7.2.1 Renewable energy share in the total final energy consumption
In 2019-2020, the RE only contributed 5.4% to the total energy mix. (17)
The alternate and renewable energy policy 2020 has set a target of increasing the share of clean energy technologies to 60 percent (30 percent RE) till 2030. (17)
11.2.1 Proportion of population that has convenient access to public transport, by sex, age and persons with disabilities
Multiple projects have been initiated for this purpose, including: a metro train service launched in the city of Lahore, Punjab; the induction of eco-friendly buses in major cities of Punjab; a Rapid Transit Project in KP; and a Green Line Bus Rapid Transit System in Karachi, the country’s most populous metropolitan city.
In terms of mode of transport, ARE policy has set a target to increase EV uptake to 30 percent of total vehicle mix and 90 percent by 2040 for all. (17)
13.2.2 Total greenhouse gas emissions per year
Transport sector emits 28 percent of Pakistan's total Green House Gas (GHG) making it the second sector after power having highest emission. (14)
The government approved its National Electric Vehicle Policy targeting a 30 percent shift to electric vehicles by 2030 to control emissions from automobile sector.
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Corporates
Outcome Risks
Increased freight traffic on land specially in a developing country like Pakistan where rail systems are poor would lead to more congestion and burden on current road infrastructure.
Exclusion of smaller businesses if the price points are not competitive for them.
Gender inequality and/or marginalization risk: No transport system can be effective if it ignores the needs of more than half of its users: women, thus resulting in a risk of effective uptake. (18)
Gender inequality and/or marginalization risk: If women inclusive systems are not designed for transport, there is a risk of countries not achieving inclusive transport and mobility systems. (18)
Impact Risks
Substantial negative impact is experienced by the people and planet in the form of increased carbon emissions if freight forwarding vehicles are not EVs.
Restricting women to fully exercise their right to use the public space will have an adverse impact on SDGs and hamper implementation of low carbon transport systems. (18)
Impact Classification
What
The inclusion of EV to the logistics will reduce the reliance on oil import for transportation and help the country in achieving its clean energy targets.
Who
Small and medium enterprises across the country that pay for high cost of transportation will benefit from cheaper alternatives offered by EVs.
Risk
If the increase in the uptake of modern transportation system is not as per GOP policy, the risk is of continuous use of condemned (fuel inefficient and safety hazard) vehicles.
Contribution
The electric vehicles are estimated to bring down the country’s annual oil import bill by USD 2 million. According to an estimate, Pakistan’s 30 percent vehicles will go electric by 2030.
How Much
The cost of transportation will reduce as average operational cost of EV is 7 times less than that of a gasoline vehicle, making transportation accessible for marginalized segments.
Impact Thesis
Reduction in carbon emissions and fuel import bill by switching transportation dependence from oil to clean energy.
Enabling Environment
Policy Environment
National Freight and Logistics Policy 2020: main objectives are to revise tracking policy, truck renewal system, harmonizing motor vehicle laws, simplifying regulations of heavy transport, setting vehicles standards and other initiatives. (19)
The policy aims to drive economic growth and trade in Pakistan by increasing the country’s competitiveness through an integrated, seamless, efficient, reliable and cost-effective freight transport and logistics, network, leveraging best in class technology, processes and manpower. (19)
Electric vehicle policy 2020-2025: The main objectives of the EV and new technology policy includes creating a pivot to industrial growth in Pakistan and encourage auto and related industry to adopt EV manufacturing. (20)
Alternate and Renewable Energy Policy 2019: It aims to create a conducive environment for the sustainable growth of the ARE sector in Pakistan in line with the UN Sustainable Development Goal number 7, namely the provision of clean and affordable energy for all. The policy envisions to have 20 percent of the generation capacity from ARE technologies by 2025 and 30 percent by 2030. (21)
Strategic Trade Policy Framework 2020- 2025: The policy framework states the incentives and interventions for "developmental priority sectors" for export. These sectors are services sector: IT, transport and logistics and tourism (but not limited to this). (3)
Financial Environment
Financial incentives: The shipping industry has the facility to avail long term financing. (23)
Fiscal incentives: Low Tax rate on Income from Freight related Services; Sales tax exemption on import of container for cargo transportation. (23)
Other incentives: In case of special economic zone: Exemption from income tax for ten years for Zone Developers, Co-developers and Zone Enterprises and One time exemption from all custom-duties and taxes on import of capital goods to Zone Developers, Co-developers and Zone Enterprises. (24)
Regulatory Environment
Provincial Motor Vehicle Ordinances and Provincial Departments are regulators. The regulations state the process of registration of motor vehicles, licensing of drivers, control of transport vehicles and transport board.
Dimensions of Goods Transport Rules 2018: The rules describe the dimensions of vehicles in terms of size, form, volume to be used across national highways. (22)
Marketplace Participants
Private Sector
FedEx, DCS, Kangaroo, DHL and APL Logistics. Investors: Asian Development Bank, IFC.
Government
Ministry of Industries, Ministry of Climate Change, Ministry of Communication, NHA, Provincial Environment and Transport Departments.
Multilaterals
USAID, World Bank, International Finance Cooperation.
Non-Profit
Pakistan International Freight Forwarders Association, All Pakistan Shipping Association. Overseas Chambers, Federal, Lahore, Karachi, Quetta and Sarhad Chambers of Commerce and Industries
Target Locations
Pakistan: Punjab
Pakistan: Sindh
Pakistan: Khyber Pakhtunkhwa
Pakistan: Balochistan
References
- (1) UNDP (United Nations Development Programme). 2022. “Pakistan: Flood Damages and Economic Losses over USD 30 billion and Reconstruction Needs over USD 16 billion.” UNDP press releases. https://www.undp.org/pakistan/press-releases/pdna-pakistan-floods.Accessed 29 March 2023.
- (2) Statista. 2023. “Third Party Logistics (3PL) Pakistan.” https://fr.statista.com/outlook/mmo/third-party-logistics-3pl/pakistan.Accessed 14 April 2023.
- (3) Ministry of Commerce. Government of Pakistan. 2021. Strategic Trade Policy Framework (STPF) 2020-25. https://tdap.gov.pk/wp-content/uploads/2022/01/STPF-2020-25-1.pdfAccessed 30 March 2023.
- (4) United Nations. 2021. “Sustainable Transport, Sustainable Development.” Interagency Report – Second Global Sustainable Transport Conference. https://sdgs.un.org/sites/default/files/2021-10/Transportation%20Report%202021_FullReport_Digital.pdf. Accessed 29 March 2023.
- (5) ADB (Asian Development Bank). 2013. Gender Tool Kit: Transport. https://www.adb.org/sites/default/files/institutional-document/33901/files/gender-tool-kit-transport.pdf.Accessed 29 March 2023.
- (6) Abid, S. 2019. “Pakistan Logistics and Transport: Problems and Solutions.” Pakistan & Gulf Economist. https://www.pakistangulfeconomist.com/2019/09/30/pakistan-logistics-and-transport-problems-and-solutions/.Accessed 14 April 2023.
- (7) Redaelli, S., and N. Rahman. 2021. “In Pakistan, Women’s Representation in the Workforce Remains Low.” World Bank Blogs. https://blogs.worldbank.org/endpovertyinsouthasia/pakistan-womens-representation-workforce-remains-low.Accessed 29 March 2023.
- (8) BOI (Board of Investment). “Sector Profile Logistics.” https://invest.gov.pk/sites/default/files/boi/Housing%20and%20Construction.pdf?gtranslate=en.Accessed 29 March 2023.
- (9) DHL. “Business Success Through Sustainable Supply Chain Management.” https://www.dhl.com/us-en/home/global-forwarding/freight-forwarding-education-center/focus-on-sustainability-glossary/business-success-through-sustainable-supply-chain-management.html.Accessed 29 March 2023.
- (10) Iqbal Institute of Policy Studies. 2021. “Revitalizing Small and Medium Enterprises (SMEs) in Pakistan.” https://iips.com.pk/revitalising-small-and-medium-enterprises-smes-in-pakistan-2/.
- (11) SMEDA.2022. “Freight Forwarding Company “. https://smeda.org/index.php?option=com_phocadownload&view=category&id=169:logistics.Accessed 29 March 2023.
- (12) Fitch Solutions. Inc. 2022. Pakistan Logistics Risk Report. https://store.fitchsolutions.com/all-products/pakistan-logistics-risk-reportAccessed 30 March 2023.
- (13) Gomez, J. 2022. “7 EV Van and Truck Companies with Big 2022 Plans.” https://www.greenbiz.com/article/7-ev-van-and-truck-companies-big-2022-plans.Accessed 29 March 2023.
- (14) Climate Transparency. 2021. Climate Transparency Report 2020: Pakistan. https://www.climate-transparency.org/wp-content/uploads/2021/11/Pakistan-CP-2020.pdfAccessed 30 March 2023.
- (15) OECD (Organization for Economic Cooperation and Development). 2015. New Approaches to SME and Entrepreneurship Financing: Broadening the Range of Instruments. https://www.oecd.org/cfe/smes/New-Approaches-SME-full-report.pdf.Accessed 29 March 2023.
- (16) Mirza. A. (2020). “7% Women Have Access to Financial Services.” The Express Tribune. https://tribune.com.pk/story/2171004/7-women-access-financial-servicesAccessed 30 March 2023.
- (17) Government of Pakistan. 2019. Alternative and Renewable Energy Policy 2019. https://www.aedb.org/images/Draft_ARE_Policy_2019_-_Version_2_July_21_2019.pdf.Accessed 29 March 2023.
- (18) Kurshitashvili. N. Carvajal. K. and Tamayo. C. (2021). “Filling in Knowledge Gaps on Gender Equality in Transportation.” The World Bank Blogs. https://blogs.worldbank.org/transport/filling-knowledge-gaps-gender-equality-transportationAccessed 30 March 2023.
- (19) Ministry of Communications. 2020. National Freight and Logistic Policy. https://communication.gov.pk/SiteImage/Policy/NFLP%20Main%20Document%20(Final)%2013%20September%202020-converted.pdf.Accessed 29 March 2023.
- (20) Engineering Development Board. 2020. Electric Vehicle Policy 2020-2025 (Draft) 2-3 Wheelers and Heavy Commercial Vehicles. https://invest.gov.pk/sites/default/files/2020-07/EV%2023HCV%20130620%20PDF.pdf.pdfAccessed 30 March 2023.
- (21) AEDB (Alternative Energy Development Board). 2019. Alternative and Renewable Energy Policy 2019. https://www.aedb.org/images/Draft_ARE_Policy_2019_-_Version_2_July_21_2019.pdfAccessed 30 March 2023.
- (22) Ministry of Communications. Government of Pakistan. 2018. Dimension of Good Transport Vehicles Rules. 2017. https://communication.gov.pk/SiteImage/Publication/goods%20transport%20rules.pdfAccessed 30 March 2023.
- (23) BOI (Board of Investment). 2023. “Sector And Scheme Incentive.” Incentives For Investors. https://invest.gov.pk/incentives-databaseAccessed 30 March 2023.
- (24) BOI (Board of Investment). 2021. “Incentives in Special Economic Zones.” Special Economic Zones Incentive Package. https://invest.gov.pk/sez#gallery-1 Accessed 30 March 2023.