Pakistan Signs $2.25 Billion Deal for Lithium-Ion Battery Gigafactory Amid Surging Energy Storage Demand

KARACHI: Pakistan’s military-owned Margalla Heavy Industries Limited (MHIL) has partnered with Chinese firms and local investors to establish a $2.25 billion lithium-ion battery manufacturing facility in Rawalpindi, marking a significant step toward reducing the nation’s dependence on imported energy technologies.

The initiative aligns with Pakistan’s broader strategy to bolster domestic manufacturing capabilities, particularly in sectors critical to future energy infrastructure such as electric vehicles (EVs) and renewable energy storage systems.

Lithium-ion batteries play a pivotal role in storing electricity produced by solar and wind sources and are essential for powering electric mobility solutions. Establishing local production lines could significantly cut import costs while drawing foreign direct investment into the region.

According to Hamad Ali Mansoor, CEO of the Engineering Development Board (EDB), feasibility studies for the gigafactory have been finalized, with the project pending final government approval before commencement of operations. “The building is ready, and machines are installed; once the policy framework is in place, production can begin within six to eight months,” Mansoor told Arab News.

Situated at Heavy Industries Taxila in the Rawalpindi district, MHIL currently produces defense-related equipment including battle tanks, armored vehicles, drones, protective gear, compact battery energy storage systems, and components for EVs like buses and two-wheelers.

This announcement follows closely on the heels of Prime Minister Shehbaz Sharif endorsing the Automotive and Auto Parts Manufacturing Policy 2026-2031, which proposes tax incentives for the EV sector subject to IMF review due to potential revenue impacts.

Upon implementation of the new auto policy, EDB forecasts that Pakistan’s demand for Battery Energy Storage Systems (BESS) may escalate to nearly 100,000 megawatts (MW) by June 2030. Meeting this target would necessitate constructing four to five gigafactories—each estimated at $1 billion to $1.25 billion—to satisfy both grid stabilization needs and commercial demand.

Mansoor noted during an interview that the agreement was signed in July with a leading Chinese lithium-ion cell manufacturer alongside a prominent local private-sector partner. While he did not disclose specific names, he emphasized their global standing in advanced battery technologies.

The forthcoming plant aims to produce over 1,000 MW annually of lithium-ion cells, starting with an initial output of 200–300 MW during early phases. Projections indicate that economic growth exceeding 5% could drive total BESS demand up to 100,000 MW by 2030, whereas slower growth rates below 3% might cap requirements around 80,000 MW.

Demand is expected to surge across multiple segments including residential units, commercial establishments, industrial complexes, and various modes of transportation encompassing two-wheelers, three-wheelers, cars, buses, and trucks.

To facilitate large-scale manufacturing, the government has drafted a comprehensive lithium battery manufacturing policy submitted to the Ministry of Industries in March. It outlines plans for four key facilities located in Lahore, Faisalabad, and Rawalpindi divisions in Punjab, along with another site in Karachi.

While details regarding mandatory export quotas remain under deliberation pending official endorsement, Mansoor confirmed that all manufactured products must adhere to stringent international safety and performance benchmarks. Currently, Pakistan assembles roughly 3,000–4,000 MW worth of batteries plus associated components such as motors, controllers, and chargers. However, the shift towards full-scale indigenous production promises greater self-reliance and cost efficiency moving forward.

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