KARACHI: Pakistan’s military-owned Margalla Heavy Industries Limited (MHIL) has signed an agreement with Chinese partners and local investors to set up a $2.25 billion lithium-ion battery manufacturing plant in Rawalpindi, an official said on Monday, with production expected to begin within months of the government approving a policy for the sector.

The development comes as the South Asian country seeks to reduce its reliance on imported energy technologies and develop local manufacturing capacity amid growing demand for energy storage, electric vehicles and renewable energy.

Lithium-ion batteries are central to storing electricity generated by solar and wind power and powering electric mobility, making domestic production a potential avenue for reducing import costs and attracting foreign investment.

The gigafactory’s feasibility studies have been completed and the project is awaiting approval before it could start manufacturing, according to Hamad Ali Mansoor, CEO of the Engineering Development Board (EDB), an apex government body entrusted to strengthen the engineering base in Pakistan.

“The building is ready, the machines are installed, so after the policy comes, the production will start within six to eight months,” Mansoor told Arab News, adding that Islamabad was working with Chinese and local stakeholders to invest in the multibillion-dollar project.

“They are investing $2.25 billion in Pakistan.”

Located at Heavy Industries Taxila in Rawalpindi district, MHIL manufactures defense equipment, including battle tanks, armored vehicles, unmanned drones, protective gear, compact battery energy storage system and EV buses and two-wheelers.

Arab News reached out to MHIL’s general manager for digital media, Muhammad Ameen, but he was not immediately available for comment.

The development comes days after Prime Minister Shehbaz Sharif approved the Automotive and Auto Parts Manufacturing Policy 2026-2031, which awaits IMF approval over proposed tax incentives for Pakistan’s Electric Vehicles industry and their potential revenue implications.

After the new EV-based auto policy takes effect, EDB estimates that Pakistan’s demand for battery energy storage systems (BESS) could reach as much as to 100,000 megawatts (MW) by June 2030.

Building a local plant to manufacture lithium-ion batteries would be crucial for the cash-strapped country, which aims to shift its petrol-powered vehicles to EVs to save billions of dollars it spends every year to import fuel.

Mansoor said the battery gigafactory project was signed in July with a Chinese company he described as one of the “top-tier manufacturers in China” alongside a local private-sector investor. He would not name the Chinese and local investors now.

“They are manufacturing lithium-ion cells,” he said, adding that the facility would produce lithium-ion cells having a capacity of more than 1,000MW annually.

EDB has estimated that grid stabilization alone could require 3,000-5,000MW of battery storage and that meeting the projected demand would require four to five gigafactories, each costing around $1 billion to $1.25 billion.

“In our industry, we will have up to 100,000 megawatts of battery energy storage systems. This is a very large capacity. For this, we need four to five gigafactories,” the EDB CEO said.

The first factory would initially produce around 200-300 MW before reaching its planned capacity of 1,000 megawatts, according to Mansoor.

“If our economy grows by 5 percent or more than 5 percent of GDP (gross domestic product), then by June 2030, our demand will be up to 100,000 MW,” he said.

“And if our GDP grows by less than 3 percent, then our demand will be up to 80,000 MW.”

Mansoor said the demand would come from households, commercial buildings, industry and electric vehicles, including two-wheelers, three-wheelers, cars, buses and trucks.

The government has prepared a lithium battery manufacturing policy that was submitted to the Ministry of Industries in March and is awaiting approval, according to the official.

The plan includes four major factories, three in Punjab’s Lahore, Faisalabad and Rawalpindi divisions and one in southern city of Karachi, aimed at building domestic capacity for batteries used in electric vehicles and energy storage.

The policy would require manufacturers to export a specified percentage of production, although Mansoor declined to provide the target before the policy’s approval.

“We will manufacture it in Pakistan and export it,” he said, adding that the policy incorporates international safety and performance standards.

Pakistan currently assembles around 3,000-4,000 MW of batteries as well as parts like motors, controllers and chargers, but needs to move toward domestic manufacturing to avoid costly imports, according to Mansoor.

“All these parts we [will] start manufacturing 100 percent in Pakistan by next year,” he added.