With petroleum prices increasing to Rs277 per litre, the fuel cost burden for a motorcycle owner will significantly increase. Pakistan needs to move fast towards electric motorcycle adoption to provide relief to these lower-middle and middle-class households. This requires enabling market-driven approaches with the government playing a facilitator role.

Assuming an average of one-litre consumption per day, motorcycle users will be spending Rs5,000 to Rs10,000 per month in fuel expenses with the new petroleum price.

This translates into about $5 billion of refined petroleum imports per year, based on the current ex-refinery price of Rs205.58 per litre and 20 litre/month average consumption for each of these 26 million motorcycles on the road. In addition, these motorcycles are contributing to about 16 per cent of Pakistan’s total CO2 emissions and impacting the environment in large cities.

Electric motorcycles/scooters can reduce this monthly fuel expense by Rs4,600-8,500 with battery charging at Rs15-25 per KWh home charging rate. In addition, if the average travel by petrol-based motorcycle is 12,000km per year, emitting 50g/km of CO2, each electric motorcycle replacing a petrol one reduces 600kg of CO2 annually.

However, electric motorcycles cost significantly more than petrol-based ones, making them unaffordable and limiting their fast adoption in the market. This is primarily due to lithium based battery, which constitute about 30-40pc of the total cost of electric motorcycles and scooters. For a used motorcycle, there is an additional cost of a conversion kit besides the battery.

While the government is actively considering various subsidies options to reduce the upfront cost burden to consumers, these options suffer from two major drawbacks: the high cost of subsidy (up to Rs90,000 per motorcycle) and total planned production of 175,000 in three years (just 0.7pc of the total market).

A successful policy drives mass adoption by enabling the market, such as the net metering policy adopted in 2015, which is one of the main reasons for the rooftop solar success story. For faster mass adoption of electric motorcycles, the policy focus should be shifted from high subsidies and very low penetration to creating market demand and letting private businesses take care of the rest.

The government can initiate a three- to five-year term loan program to facilitate this fast conversion. These loans should only cover the added cost of the battery for a new motorcycle or battery plus conversion kit for a used motorcycle conversion.

Assuming a person in the market for a new motorcycle typically purchases it using their own funding or financing, the government loan should not cover the cost of the new bike itself. Import duty exemptions on electric motors and LFP (Lithium Iron Phosphate) battery packs would also help to bring the cost down for consumers.

Following is one scenario of how this can be implemented to drive the market.

First, target at least 2m initial adoptions of electric motorcycles in two years to provide relief to 2m households and make an appreciable impact on the import bill. This can be done effectively by considering both new productions (20pc) and retrofitting existing motorcycles (80pc) with conversion kits. This will result in import bill savings of at least Rs130bn ($500m).

Second, provide three-year term loans for a 1.0–2.0Kwh (30-60km daily use) battery for a new motorcycle and a five-year term for a retrofit plus battery. With the current LFP battery and conversion kit prices, the monthly loan payment will range from Rs2,500 (1KWh battery) to Rs5,500 (retrofit+2KWh battery).

After including the charging cost, this will still save 30-40pc in monthly transportation cost compared to the current expenses on fuel & maintenance of a petrol motorcycle, irrespective of daily distance travelled.

Third, as retrofits are needed to drive market penetration, the government may contribute up to Rs1,000 per month towards loan payments to compensate for the cost of retrofits and a high-interest rate of 19pc, with a cap of Rs10bn outlay per year. This contribution can be discontinued or reduced once the interest rate falls below 13pc.

Fourth, for consumer protection and to drive quality, the Engineering Development Board (EDB) should prepare specifications and a list of approved suppliers for motors, controllers, and LFP batteries with a minimum one-year warranty on the motor and a three-year warranty on the battery.

These specifications should be the same for new or retrofits to avoid low-quality conversion kits. The government loan should also be tied to approved motors, controllers and batteries.

Successful implementation will minimise the need for government subsidies and will drive faster consumer adoption. This will create a market demand for private businesses to provide high-quality conversion kits and batteries and an impetus for motorcycle manufacturers to increase the capacity for their electric versions.

These market-driven mechanisms can lead to 50pc adoption (15m motorcycles) in five years, saving more than $2.5bn per year in the petroleum import bill and a significant reduction of CO2 emission. The government also saves money by providing minimum subsidies.

The writer is an engineering executive in the US tech industry.

He can be reached at arsyed@cox.net

Published in Dawn, February 27th, 2023