Key Takeaways
- The draft New Energy Vehicle policy aims to electrify transport and cut oil imports.
- Critics argue the policy treats plug-in hybrids and battery electric vehicles equally, weakening its environmental goals.
- The policy is seen as favoring plug-in hybrids over battery electric vehicles, potentially hindering charging infrastructure development.
The draft New Energy Vehicle (NEV) policy in Pakistan has been criticized for its flawed incentive structure, according to a recent article in Dawn. The policy aims to electrify transport, reduce the country's oil import bill, and build an export-oriented auto industry. However, the current incentive framework is seen as inadequate in achieving these goals.
One of the main criticisms is that the policy treats plug-in hybrid vehicles (PHEVs) and battery electric vehicles (BEVs) as interchangeable, offering the same 1pc sales tax on complete knock-down (CKD) units and NEV inputs. This approach is seen as problematic because PHEVs running primarily on petrol do not deliver the same environmental benefits as BEVs, which run on battery power alone.
Weak charging infrastructure and range anxiety are cited as significant barriers to BEV adoption in Pakistan. By heavily subsidizing PHEVs, the policy is seen as providing an easier option for consumers, which may show progress on paper but does little to build the necessary charging network or increase demand for BEVs.
The article notes that PHEVs received generous concessions in the previous auto policy but failed to deliver on localisation or charging infrastructure. The draft policy is criticized for repeating this arrangement, which could lead to the same outcome: subsidised assembly without real technology transfer.
Additionally, the policy's tax structure is seen as unfair, with conventional hybrids taxed at 25pc, up from 8.5pc, while PHEVs are taxed at 1pc. This approach is described as picking a winner through the tax code rather than through market competition, which stalls the transition towards genuine transport electrification.
The article suggests that a more coherent policy should reserve the sharpest incentives for BEVs, allowing other technologies to compete based on their actual emissions and fuel-savings performance. It emphasizes that consumers, not tax brackets, should decide which technologies are best suited for the market as charging infrastructure improves and prices come down.
While the rest of the draft policy holds up, the article argues that export targets, tighter localisation rules, and incentives tied to auto-parts exports could push manufacturers to build for international markets. However, these incentives need to reward genuine export growth and local value addition, rather than simply subsidising the same low-localisation assembly model that has defined the industry for decades.
Critics of the policy argue that this approach could penalise Japanese manufacturers who have built much of Pakistan's auto parts ecosystem. They suggest that a more focused and coherent policy is needed to truly drive the transition towards electrified transport and build a sustainable auto industry.
