Pakistan is planning to establish domestic lithium-ion battery production, with Margalla Heavy Industries Limited (MHIL), a military-owned company, signing an agreement with Chinese partners and local investors to set up a US$ 2.25 billion lithium battery manufacturing plant in Rawalpindi.

Engineering Development Board (EDB) Chief Executive Officer Hamad Ali Mansoor provided details to the media on October 26th, saying production could begin within six to eight months of the government's approval of the relevant policies.

The proposed investment would exceed the reported cost of approximately US$ 2 billion for the China Power Hub power project, which began operations in 2019. Mansoor described the Chinese partner as one of China's leading manufacturers but did not disclose the names of the Chinese or local investors or their respective contributions.

Which policy approvals are required?

The first requirement is approval of the lithium battery manufacturing policy, drafted by the government and submitted to the Ministry of Industries in March. It remains pending approval and proposes four factories, three of which would be located in Punjab's Lahore, Faisalabad and Rawalpindi divisions.

The second requirement is approval of the auto policy. Prime Minister Shehbaz Sharif reportedly approved the Auto Policy 2026-2031 recently, but it still requires approval from the Cabinet, the International Monetary Fund (IMF) and the Economic Coordination Committee (ECC).

Demand projections

The EDB expects demand to depend on economic growth and assumes that the new EV-based auto policy will come into effect. Mansoor said demand would come from households, commercial buildings, industrial applications and EVs, including two-wheelers, three-wheelers, cars, buses and trucks.

According to the EDB, grid stabilisation alone could require 3,000 to 5,000 MW of energy storage capacity. Meeting total projected demand would require four to five gigafactories, each costing approximately US$ 1 billion to US$ 1.25 billion.

Pakistan's current battery production capacity

Pakistan currently assembles batteries with a combined capacity of approximately 3,000 to 4,000 MW but does not manufacture the batteries themselves. It manufactures lead-acid batteries domestically, commonly used as 12V batteries in petrol-powered cars and motorcycles, as well as in some electric scooters and rickshaws.

However, lead-acid batteries do not meet the requirements of four-wheel electric vehicles, which need high-energy-density batteries such as lithium-ion batteries. The illustration below explains the differences between the two types. If completed as announced, the proposed US$ 2.25 billion plant could become Pakistan's first major lithium-ion cell manufacturing facility.

Could locally manufactured batteries reduce EV prices?

The proposed gigafactory could affect EV prices in Pakistan. Although the government is promoting EV adoption, vehicle prices remain a barrier for buyers. Batteries account for a substantial proportion of an EV's cost, while Pakistan's reliance on imported battery cells and packs adds to production costs.

The Honri Ve is currently the only locally assembled passenger electric vehicle available for sale in Pakistan. Priced at Rs. 3.6 million (US$ 37,760), it costs more than an internal combustion engine (ICE) car in the same segment, such as the Alto.

Domestic battery manufacturing could reduce reliance on imported cells, which account for a substantial share of an EV's cost. However, the effect on vehicle prices would depend on production volumes, imported raw material costs, manufacturing efficiency and the competitiveness of locally produced cells against international suppliers.

MHIL has not disclosed which sectors the plant would supply initially or provided details of its plans to supply batteries to the EV industry during the early stages of production.