Are electric cars also destined to take the “CNG route”?

With fuel costs reaching astronomical levels, there’s a lot of buzz surrounding electric vehicles these days; how good are they for the environment, can they help Pakistan reduce its reliance on expensive imported fuels and, perhaps most importantly, what will be the benefit or “return on investment”? for the consumer who chooses to invest in this expensive but environmentally friendly fuel? user-friendly technology?

Hybrids, plug-in hybrids and pure battery electric vehicles each have a price premium that far exceeds comparable vehicles with internal combustion engines. Price premiums range from up to 20pc in hybrids, up to 30pc in plug-in hybrids (due to their larger battery size) and over 40pc in the case of battery electric vehicles.

But unlike the mileage or fuel-efficiency claims that any manufacturer puts forward – usually after testing the vehicle under ideal conditions – most real-world buyers need to consider factors such as the actual fuel average on Pakistani roads, in local weather and traffic conditions. .

An auto industry insider told Dawn that customers as well as policy makers need to understand the difference between “claimed reality and real reality” so buyers can make informed decisions before costly purchases.

He said the payback period for hybrids and other electrified vehicles is over seven years and over 200,000 km, which may come as a surprise to many, especially since these vehicles are marketed to customers under the banner of energy efficiency and as an environmentally friendly option.

While the operating cost per kilometer of these modern vehicles seems relatively lower given their low fuel consumption, the initial cost of ownership dilutes this advantage.

Traditionally, first-time buyers tend to keep their vehicle for between three and five years before reselling it, that is to say generally before it reaches the 120,000 km mark. That means the first-time buyer won’t technically get any benefit by choosing to buy an electrified vehicle, the insider said.

Electric and hybrid vehicles are mostly purchased by those who can afford luxury cars, rather than the average customer, whose purchasing power can only handle locally made 660-1000cc petrol vehicles, did he declare.

The insider told Dawn that first-world countries, or those with a higher renewable energy mix, could afford to subsidize these vehicles, which would lower their initial cost.

For example, the UK offers a plug-in grant for low-emission vehicles, which subsidizes their cost by £500 to £1,500. Countries like Pakistan, however, cannot afford to subsidize the purchase of such vehicles as economic returns take a long time to mature, in addition to putting a burden on foreign exchange reserves, he said. .

Pakistan is already grappling with higher imports exceeding $70 billion, while 65% of our electricity is generated from fossil fuels. The auto industry insider said it didn’t make sense for the government to give duty or tax breaks on technologies as expensive as hybrids and electric vehicles.

The recently launched Rinco Aria, which runs on a lithium iron phosphate battery, presented itself as a cheaper alternative to the big brands. At 2.4 million rupees, the car is more affordable than other electric vehicles. However, it’s too early to tell if it will offer better value for money or fall prey to the same issues.

Currently, the state provides duty/tax relief to electrified vehicles ranging from Rs 900,000 per unit on hybrids to around Rs 2 million per unit on battery electric vehicles in the form of duty reduction and general sales tax.

Specific components for these vehicles, such as battery, motor, controllers, however, will continue to be imported, thus increasing the import bill, he said, urging the government to take corrective action before the Import figures for these vehicles are reaching alarming levels.

The situation for electric two-wheelers is not much different.

Pakistan Motorcycle Assemblers Association Chairman Mohammad Sabir Sheikh told Dawn: “If the government allows duty and tax free importation of the 100cc equivalent imported electric scooter, it will cost 150,000 rupees, while it will be priced at 225,000 rupees after import. rights and taxes “.

He said the price of an electric scooter can be brought down to Rs 130,000 if the government allows duty and tax free imports of its parts and accessories for local assembly.

Consumers who were once very happy with the fuel savings offered by hybrid and electric vehicles have seen a sea change. Software engineer Bilal Saleem, who bought a 2018 Toyota Aqua Hybrid model for 1.6 million rupees, said it gave him a mileage of 15-16 km.

While that’s still better than most inefficient gasoline engines can handle, Saleem says the massive upfront cost and expensive parts make it a losing deal.

“I will prefer a petrol car to a hybrid if I ever switch cars as the latest model of the Aqua even second hand will cost around Rs 5.5 million,” he added.

He said that even a used lithium battery costs between Rs 300,000 and 400,000 while the cost of a new model is beyond his reach.

CNG flashback

This situation may be familiar to those who experienced the heyday of compressed natural gas (CNG) vehicles in the late 90s and 2000s.

In his day, CNG mania swept the country as natural gas was touted as a cheaper and more plentiful alternative to gasoline and diesel.

CNG was launched with great fanfare as an environmentally friendly fuel to provide savings of 40-50% compared to gasoline. Although it boomed in the first decade of the new millennium, things started to go downhill from 2012 when the Supreme Court changed the cost structure of natural gas.

Since then, the CNG sector has been struggling for survival and over the past two years the crisis has only worsened given the shortages of natural gas, leading to the compulsion to import expensive LNG to meet domestic and industrial needs.

All Pakistan CNG Association Vice President Samir Najmul Hussain told Dawn that their Rs 400 billion investment in land acquisition, equipment and infrastructure development in 2005-2006 had almost been wiped out. .

Commenting on the future of electric vehicles, Mr Hussain said: “We cannot be so excited right now, amid the lack of infrastructure, the continued threat of power shortages, the failure to fix electricity tariffs, etc.”

Hybrid and plug-in hybrid vehicles may be the future, but rising prices would appear to be a big problem even if these vehicles are manufactured locally in Pakistan, he said.

Posted in Dawn, June 5, 2022

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