Removal of duty on electrical vehicles triggers affordability debate

KARACHI: The expiry of regulatory duty SRO on the import of electric vehicles (EVs) has triggered a debate about the affordability of EV imports, especially in the middle of fast depleting foreign exchange reserves and who it would benefit.

After the expiration of SRO1571(I)/2022 on November 21, 2022, the regulatory duty (RD) on electric vehicles (EVs) has been removed and prices of electric vehicles dropped sharply. The price of the top model of Audi Etron dropped by around Rs20 million.

With the removal of RD, price of RS e-tron GT fell by Rs19.5 million to Rs48.5 million from Rs68 million. E-tron GT’s price dropped Rs13.8 million to Rs34.5 million, e-tron SB rates dropped by Rs11.3 million to Rs24.85 million and the price of e-tron 50 decreased by Rs10.15 million to Rs22.3 million.

In order to discourage imports, the government banned luxury CBUs in June 2022. Later, in August 2022, ban was changed to 100 percent on luxury cars till February 2023. However, the SRO expired on November 21.

There are speculations that influential investors have parked electric vehicles in Dubai and around 300-400 EVs including e-tron, Mercedes EQS and some Chinese electric vehicles would be imported without RD on them.

However, analysts were of the view that the country would not be able to afford such luxury with depleting foreign exchange reserves, and a new SRO might arrive soon. Supporters of RE vehicles in the government had criticised the Federal Board of Revenue (FBR) for the RD imposition, as they thought the import of RE vehicles would cut down the import bill, as these vehicles would not require any oil.

However, analysts said that Pakistan largely produces electricity on fossil fuels, and there would be no improvement in the environment. They said whether you burn oil and make electricity or run vehicles on that oil, it has the same impact.

Talking to The News, expert auto sector Mashood Ali Khan said that economic stability was not coming to the country due to political instability. He said that SROs do have an expiry period, but that SRO should have been re-launched, as the country could not afford to import luxury items, especially EV CBUs.

“Import of finished and luxury products is not feasible for Pakistan,” he said. “Even imported electric buses are not feasible.” Mashood said that in the absence of the SRO, one could speculate that some people might be provided with the benefit of removal of the RD, but it was not a time to provide benefit to anyone.

He said Pakistan was stuck with foreign exchange and there was a need for a long-term policy to face these challenges. Besides, he said, the focus should be on the localisation of vehicles and industry and the import of finished luxury items should be discouraged. “This is not a time to provide benefits to any person, it is time to mitigate the challenges. Political stability and economic stability is required,” he added.