Manufacturing of Electric Vehicles
Manufacturing of Electric Vehicles
Business Model Description
Invest in B2B and B2C businesses engaged in manufacturing of electric vehicles or in scaling existing plants to cater to domestic and international sales. This may involve a variation as per need and market for passenger cars, 2-3 wheelers and heavy transport vehicles. Examples of companies active in this space are:
Yes Electromotive Ltd. started its operations in 2021 and has successfully manufactured 3 and 4 wheeler electric vehicles based on the Modular Utility Vehicular Architecture (MUVA) concept. The company intends to raise USD 30 million in equity to upscale its operational capacity in Pakistan. (8)
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: Khyber Pakhtunkhwa
- Pakistan: Sindh
Sector Classification
Transportation
Per capita emissions generated by the transport sector have increased by 44% during 2013-2018. Transport sector consumed 76 percent of 19 million tonnes of oil consumed during 2018-2019 and generated 28 percent of 199 MtCO2 emissions from fuel combustion in 2019.To maintain a 1.5°C limit of temperature of global warming, passenger and freight transport needs to be decarbonized. (1)
Policy priority
Electric vehicle policy 2020-2025: The main objectives of the EV policy are: 1. Create a pivot to industrial growth and encourage auto and related industry to adopt EV manufacturing. 2. Mitigate negative aspects of climate change through reduction in emissions by introduction of fuel-efficient green technologies. 3. Employment generation through introduction of new investments (1)
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 Sustainable Development Goals (SDGs). In the field of public transportation, safety concerns disproportionately affect women without access to a vehicle, especially those women who work low income and hourly jobs (2). Additionally, women face challenges when using transportation to access markets as a part of a business supply chain and as a distributor since it impacts their travel patterns and transport modes. (3)
Investment opportunities
With implementation of mega projects like China Pakistan Economic Corridor, transport sector is a national policy priority and inter and intra province transport is a priority in all provinces. Punjab, Khyber Pakhtunkhwa and Sindh have launched public projects for urban transportation aiming to ease the intracity movement of general public. (4)
Key bottlenecks
Bottlenecks in investment in the automotive sector include government's restrictions for imports, shrinking sales (40 per cent drop in sales of cars, SUVs, pickups and jeeps in 7 month of Financial Year 23) and devaluating currency.
Automobiles
Due to the impact of floods and covid-19 on the economy, the automobile sector needs investment to continue the contribution to economy as revenue in the passenger Cars market is projected to reach USD 5.70 billion in 2023. At the same time due to economic situation, 250,000-300,000 direct and indirect jobs have been lost. (5)
Policy priority
Electric Vehicle Policy aims to electrify all passenger vehicles and heavy-duty trucks to achieve 30 percent electrification of all vehicles by 2030 and 90 percent by 2040. (6)
Gender inequalities and marginalization issues
Most women in the world find it hard to travel than men, as they face more mobility barriers than men in accessing and using transport. As a result, they have access to fewer opportunities. Women's labor force participation is ~10 percent since the past 20 years due to lack of safety in transit to schools, workplaces and business opportunities. (7)
Investment opportunities
The largest driver of overall GHG emissions are CO2 emissions from fuel combustion. The industrial sector – at 32 percent – is the largest contributor, followed by transport and electricity at 28 percent and 27 percent, respectively. Opening up opportunities for EVs and charging stations will help in addressing such environmental issues. (1)
Key bottlenecks
Bottlenecks in investment 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. (8)
Automobiles
Pipeline Opportunity
Manufacturing of Electric Vehicles
Invest in B2B and B2C businesses engaged in manufacturing of electric vehicles or in scaling existing plants to cater to domestic and international sales. This may involve a variation as per need and market for passenger cars, 2-3 wheelers and heavy transport vehicles. Examples of companies active in this space are:
Yes Electromotive Ltd. started its operations in 2021 and has successfully manufactured 3 and 4 wheeler electric vehicles based on the Modular Utility Vehicular Architecture (MUVA) concept. The company intends to raise USD 30 million in equity to upscale its operational capacity in Pakistan. (8)
Business Case
Market Size and Environment
> USD 1 billion
5% - 10%
In 2022, there are 8000 EV and by 2025 the GOP intends to increase number to 600,000. (5)
CAGR for 2022-2027 for EV batteries market is estimated to be more than 3 percent, for electric cars is 8 percent and for buses is 3 percent.
Production in Pakistan can be an alternative to the imported transport and capital equipment which has 22 percent of the import bill value in 2021. (10)
Indicative Return
> 25%
10% - 15%
The financial modelling of Yes Electromotive shows IRR of 31 percent. (8)GPM is around 13- 15 percent from 2017-21 for passenger vehicles including trucks and buses(18)
The operational cost of running an EV is lower than that of a fuel-based bus. (9)
Investment Timeframe
Medium Term (5–10 years)
The financial modeling of Yes Electromotive shows a payback period of 5 to14 years. (8)
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
The Global Climate Risk Index ranks Pakistan as the 5th most vulnerable country due to climate change as GHG emissions from the country are increasing, with major contributions from the transport sector (28 percent contribution to total CO2 emission in 2019). (1)
Pakistan's import bill is highest for fuel consumed for electricity, as well as other forms of fuels, such as petrol and diesel. Constant devaluation of currency and the growing need for energy has put an immense burden on the economy, thereby making fuel run cars cost ineffective. (10)
Gender & Marginalisation
Affordable and safe means of transport is the need of the hour which can provide women access to health, education, along with higher opportunities for employment. (11)
A report published by Asian Development Bank (2014) corroborates that 70 percent of Pakistani women who use public transport faced harassment making safe, affordable and accessible transport a need. (12)
Expected Development Outcome
Decrease carbon footprint of transport sector. Electric vehicles typically have a smaller carbon footprint than gasoline cars, even when accounting for the electricity used for charging.
Increase energy efficiency with the introduction of EV for personal and heavy vehicles which will equip the country in achieving the targets of shifting to non-carbon-based transport till 2030.
Decrease in import bill for fuel, which is likely to reduce by USD 2 Million annually by higher use of EVs. (500,000 2 and 3 wheelers and 100,000 cars by 2030). (13)
Gender & Marginalisation
Provide safer and cheaper modes of transport for women and other vulnerable communities. Ride-E is a concept that promotes the usage of two-wheelers for students and working women.
Investment in this IOA can contribute to reducing global pollution that disproportionately affects women and already vulnerable communities.
Primary SDGs addressed
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. (14)
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. (15)
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. (5)
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. (15)
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Outcome Risks
Risk of price fluctuations or higher purchase costs may restrict the uptake of EVs, including two- or three-wheelers, cars and buses.
Investing in EVs maybe risky since manufacturing batteries is expensive due to high-cost associate of procuring raw-materials for batteries.
If investments are not made in the IOA the risk is of continuous use of condemned (fuel inefficient and safety hazard) vehicles. (17)
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. (16)
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. (16)
Impact Risks
Factors such as policy incentives, consumer characteristics, availability of charging stations, travel distance can disrupt delivery of expected impact.
Women and marginalized communities are more exposed to the risk of climate change, as already seen the impact of 2022 floods which have disproportionately impacted women.
Impact Classification
What
The inclusion of EV to the road transport to reduce the reliance on oil import for transportation and help the country in achieving its clean energy targets.
Who
Population at large, specifically those who use two- or three-wheelers, or busses for commute - benefit from cheaper modes of transport.
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. (36)
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
Electric vehicle policy 2020-2025: The main objectives of the EV policy are: 1. Create a pivot to industrial growth and encourage auto and related industry to adopt EV manufacturing. 2. Mitigate negative aspects of climate change through reduction in emissions by introduction of fuel-efficient green technologies. 3. Employment generation through introduction of new investments (1)
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) (10)
National Freight and Logistics Policy 2020: revised tracking policy, truck renewal system, harmonizing motor vehicle laws, simplifying regulations of heavy transport, setting vehicles standards and other initiatives. 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. (18)
Financial Environment
EV specific parts like batteries, motors, motor control units, and others can be imported at 1 percent custom duty (CD) compared to the 25 percent CD for non-EV specific parts. All locally made EVs can be sold at 1 percent general sales tax (GST) compared to the standard 17 percent GST. (6)
Duty-free import of machinery and hardware has been allowed to establish EV. The corporate income tax has been abolished for companies manufacturing EVs and EV specific parts. Reduced the rates for registration of EVs and yearly token tax on these vehicles. (6)
Incentives of special economic zone will also apply if it is investors choice. (19)
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.
Marketplace Participants
Private Sector
Corporates: MG Motors, Sapphire Group and Ride-E Investors: BYD, Gauss JW Group, MG and the likes.
Government
Engineering Development Board, Ministry of Climate Change and Pakistan Standards Quality Control Authority.
Multilaterals
International Finance Cooperation, Asian Development Bank and Japan International Cooperation
Non-Profit
Non-Profit: Pakistan Association of Automotive Parts and Accessories Manufacturers, Pakistan Automotive Manufacturing Association, Overseas Chambers of Commerce and Industries, Federal and Regional Chambers of Commerce and Industries.
Target Locations
Pakistan: Punjab
Pakistan: Khyber Pakhtunkhwa
Pakistan: Sindh
References
- (1. Climate Transparency. 2020. Pakistan Climate Transparency Report. https://www.climate-transparency.org/wp-content/uploads/2021/11/Pakistan-CP-2020.pdf.Accessed 29 March 2023. 2. 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. 3. 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. 4. Brunner, H. 2013. ADB’s Working Paper Series on Regional Economic Integration. https://www.adb.org/sites/default/files/publication/100110/reiwp-117-economic-corridor-development.pdf.Accessed 29 March 2023. 5. Statista. 2023. “Passenger Cars Pakistan “. https://www.statista.com/outlook/mmo/passenger-cars/pakistan.Accessed 29 March 2023. 6. EDB (Engineering Development Board). “Electric Vehicle Policy.” http://engineeringpakistan.com/electric-vehicle-policy/.Accessed 29 March 2023. 7. Redaelli, S. and Rahman, N. 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. YesElectricMotive. https://yeselectromotive.com/.Accessed 29 March 2023.
- (9. Energy Update Magazine. 2021. “Sapphire’s EV Ambitions.” https://www.energyupdate.com.pk/2021/04/02/sapphires-ev-ambitions/.Accessed 29 March 2023. 10. 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 29 March 2023. 11. Zulfiqar, F. 2020. “Public Transportation System and Female Mobility in Pakistan.” PIDE Blog. https://pide.org.pk/blog/public-transportation-system-and-female-mobility-in-pakistan/.Accessed 29 March 2023. 12. Asian Development Bank (ADB). 2014. “PAK: Rapid Assessment of Sexual Harassment in Public Transport and Connected Spaces in Karachi.” Technical Assistance Consultant’s Report. https://www.adb.org/sites/default/files/project-documents//44067-012-tacr-19.pdf.Accessed 29 March 2023. 13. Afsar, A. 2019. “Pakistan’s Electric Vehicle Policy: Policies and Challenges.” Centre for Strategic and Contemporary Research Publication. https://cscr.pk/explore/themes/energy-environment/pakistans-electric-vehicle-policy-opportunities-and-challenges/.Accessed 29 March 2023. 14. 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 29 March 2023. 15. PACRA (The Pakistan Credit Rating Agency Limited). 2021. Trucks and Buses Sector Study. https://www.pacra.com/sector_research/Trucks%20&%20Buses%20-%20PACRA%20Research%20-%20Dec%20'21_1639308811.pdf.Accessed 29 March 2023. 16. ADB. 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. 17. Masood. M. (2011). “Transportation Problems in Developing Countries Pakistan: A Case in Point.” International Journal of Business and Management. 6 (11). 256. https://www.researchgate.net/publication/266469087_Transportation_Problems_in_Developing_Countries_Pakistan_A_Case-in-PointAccessed 29 March 2023. 18. Ministry of Communications. 2020. National Freight And Logistics Policy 2020. https://communication.gov.pk/SiteImage/Policy/NFLP%20Main%20Document%20(Final)%2013%20September%202020-converted.pdf Accessed 29 March 2023. 19. BOI (Board of Investment). 2021. “Incentives in Special Economic Zones.” Special Economic Zones Incentive Package. https://invest.gov.pk/sez#gallery-1 Accessed 28 March 2023.