Overview The growing motorization of Asia will not only worsen traffic congestion, but it will also result in increased greenhouse gas emissions and air pollution. Solving this challenge will require moving away from the combustion engine and toward electric vehicles. A working paper from the Asian Development Bank (ADB) recommends the actions that can be taken to support this evolution of the Asian transport sector. These include measures that address barriers to the widespread adoption of electric vehicles, such as the high up-front investment and lack of charging points. E-Mobility Options for ADB Developing Member Countries presents an analysis of options for the development and deployment of e-mobility solutions in developing Asian countries. This summary was adapted from the working paper. Context A well-functioning transport sector is vital for the economic and social development of countries. Transport affects the global climate through its emissions, and pollutants reduce air quality and have negative impacts on human health and ecosystems. In 2015, the transport sector emitted around 7.5 billion tons (t) of carbon dioxide (CO2) representing 18% of all man-made CO2 emissions. The International Energy Agency (IEA) projects 50% higher transport emissions by 2060, with strong growth especially in trucks and buses, while cars, small buses, and trucks with less than 3.5 t would remain at current emission levels. The majority of Nationally Determined Contributions identify transport as a mitigation priority. Multiple countries in Asia made electric mobility (e-mobility) pledges. The electrification of transport is one of the megatrends in mobility and is an important pillar to achieve its decarbonization. The focus of this working paper is on pure electric vehicles. Hybrid and plug-in hybrid vehicles reduce fuel consumption, but for many countries, it is more attractive to move directly from fossil fuel vehicles toward electric vehicles. Fuel cell vehicles are not included due to large energy usage for the production of hydrogen, with three times higher energy usage than electric vehicles resulting in potentially higher greenhouse gas (GHG) emissions than fossil fuel vehicles. The report also focuses on road transport, including all vehicle categories. Electrification is also an option for rail, shipping, and, in the future, for aviation. The Electric Vehicle Market By 2017, three million electric and plug-in hybrid cars were plying the world’s roads. Electric vehicle sales are increasing worldwide, but are still disproportionally concentrated in few countries, with 80% of all electric vehicles being sold in just three countries: the People’s Republic of China (PRC), Norway, and the United States. Sales are not only focused on certain countries, but also concentrated in a few metropolitan areas, with just 20 cities accounting for around 40% of the world’s electric passenger cars. By 2020, it is projected that 4.5 million electric vehicles could be sold (i.e., around 5% of the global passenger car sales) and by 2030, this figure could reach 20% of global vehicle sales. Figure 1: Public Charging Infrastructure and Electric Vehicles in Cities DC = direct charge, PRC = People’s Republic of China. Note: DC fast chargers in PRC cities include those of public transport companies not open to the public but used by their fleet of buses and taxis (public transport companies in PRC, in general, also operate taxi fleets). Source: ICCT. 2017. In 2017, around 3 million chargers were installed, of which around 330,000 units were publicly available slow or fast chargers (two-thirds slow chargers and one-third fast chargers). Fast chargers include AC 43 kilowatt chargers, DC chargers, Tesla Superchargers, and inductive chargers. Publicly accessible infrastructure, especially fast chargers, is growing rapidly. The number of fast chargers is important as concerns about charging facilities are among the main reasons why consumers do not purchase electric vehicles. The PRC dominates the electric two-wheeler market with a vehicle stock estimated at 200 million to 230 million units. Other countries in Asia with notable shares of electric 2- and 3-wheelers include Bangladesh, India, Nepal, and Viet Nam. In 2017, there were nearly 400,000 electric buses operating worldwide, with 99% of the total in the PRC. Electric buses or e-buses in the PRC made up around 17% of the total bus fleet and 22% of new bus sales, with many cities electrifying completely their urban bus fleets within the next few years. Electric trucks circulate in small numbers. However, electric urban delivery trucks recently surged as a viable alternative with multiple manufacturers entering the market. It is expected that after 2025, light- and medium-duty electric trucks could start to penetrate the market massively (with heavy-duty trucks to follow later). Electric Vehicles and the Grid The number of chargers per vehicle will depend largely on the country, the density of electric vehicles, and the power of chargers. Leading electric vehicle countries have a large number of public charging points—however, there is no universal benchmark for the ratio of electric vehicles to chargers. For example, California has 25 to 30 electric vehicles per public charger (vehicle owners have frequent access to home and workplace charging and thus require minimum access to public chargers), while in the Netherlands, the ratio is two to seven electric vehicles per public charger (private parking space is more limited). Research suggests that the installed electrical capacity required to meet the demand from electric vehicles by 2030 will not be a major constraint. The IEA, in its 2-degrees Celsius (2°C) global warming scenario, estimates that the additional generation needed to meet electric vehicle demand represents only 1.5% of total electricity demand in 2030. However, this statement is not correct in the case of small grids and with large electric vehicle penetration rates. For example, the electricity demand from electric vehicles for Fiji—assuming the country would only introduce electric vehicles by 2030—would be four times higher than the current production level. Running 100% electric vehicles not only stresses the grid in electricity production but also in power demand. Vehicle charging can have a sizable impact on the loads applied to the grid at certain times and locations. The rise in the number of electric vehicles can be accommodated fairly easily by power generation facilities as long as the vehicles are charged off-peak. Faster charging during peak demand, however, can have a significant impact. The extent on which these vehicles will impact the electricity networks will depend greatly on technologies and charging modes used, with the bulk of charging expected to occur in low-voltage distribution grids in residential or commercial areas. Therefore, grid management is considered critical rather in terms of absolute capacities. Problems that can occur include increased peak loads and charging hotspots resulting in local network overloading. Solutions proposed for these problems involve controlled charging and smart charging using demand side management. The effectiveness of demand-side management can be enhanced by bidirectional “vehicle-to-grid” capabilities where power can flow from the grid to the vehicle and vice versa. This could also be an attractive source of revenue for electric vehicle owners. For fast charging, managing power demand is also likely to require the deployment of stationary storage at the local level. Increasing renewable energy penetration rates requires sufficient energy storage systems due to the unpredictability of renewable sources (e.g., wind and solar) especially for small isolated island states. Electric vehicle fleets could play a role as distributed energy storage systems, thereby helping to increase the share of renewables. Second-life batteries from these vehicles can also play an important role in storing the fluctuating supply of energy from renewable sources. Electric Vehicles and the Environment Electric vehicles have no direct or combustion emissions. Including indirect or upstream emissions caused by energy production and distribution, electric vehicles still perform far better in terms of GHG emissions even if the electric grid is highly powered by fossil fuel. Electric vehicles have lower GHG emissions than fossil comparable vehicles up to a grid factor of 1.2 kilogram of carbon dioxide equivalent emission per kilowatt-hour. The Asian countries with the largest GHG impact when using electric vehicles are those with a high share of renewable electricity production, such as Armenia, Bhutan, Georgia, the Kyrgyz Republic, the Lao People’s Democratic Republic, Nepal, and Tajikistan, while countries with a high carbon factor in electricity production such as India, Indonesia, Kazakhstan, Mongolia, and Turkmenistan will only result in limited GHG reductions by deploying electric vehicles. GHG emissions also result from the production of vehicles and their components, specifically in the case of electric vehicles from batteries. The impact of GHG emissions caused by battery production is reduced because electric vehicle batteries can be used for stationary applications after terminating their useful life span on the vehicle. Also, electric vehicles save on vehicle manufacturing-related emissions, due to less usage of materials used for engine manufacturing, less or no usage of oils and lubricants, and a longer life span of the vehicle due to less vibrations and longer-lasting parts. For buses and trucks, upstream manufacturing emissions account for less than 5%–10% of total GHG emissions while for passenger cars the figure is 15%–30% (depending on the electric grid). In all cases, even if including all upstream and downstream emissions, electric vehicles will result in significant GHG reductions if the grid factor is below 0.8 kilogram of carbon dioxide equivalent emission per kilowatt-hour. Electric vehicles not only reduce GHG emissions but also local pollutants, including particle matter, nitrogen oxide, and sulfur dioxide. The magnitude of the impact will depend largely on the prevailing vehicle emission standards of the country and the type of vehicle replaced (fuel type and vehicle category). In general, it can be stated that pollution impacts will be significant if urban buses, trucks, diesel passenger cars, and 3-wheelers are replaced. Even if such vehicles theoretically comply with stringent emission standards, the practical experience is diesel vehicles are not well maintained and real-world emissions are far higher than what vehicle manufacturers claim. Clean air in urban areas is not achievable with the usage of diesel vehicles. Electric vehicles also have significantly lower noise levels especially during the start and stop the process, and at low speeds where engine noise dominates. The impact on GHG reductions will be far higher by deploying commercial electric vehicles instead of private units due to higher fuel usage, higher mileage, and longer life span of commercial vehicles. Replacing one urban diesel bus with an electric unit has the same impact as replacing 35 fossil fuel passenger cars or 300 motorcycles. Therefore, a focus on commercial vehicles maximizes the emission impact. The Economics of Electric Vehicles The profitability of electric vehicles will depend basically on (i) the level of fossil fuel prices, (ii) the level of electricity prices, (iii) the financial incentives for electric vehicles, and (iv) the nonfinancial incentives for electric vehicles. The significant up-front subsidies given from countries with high electric vehicle numbers is a clear indication they are currently not considered as financially profitable. As an example, Norway, which has the highest share of electric cars, subsidizes 45% of the electric vehicle price; and the PRC, which has the largest number of electric cars, subsidizes 23% of the total price while also giving numerous other benefits. Figure 2: Key Concerns of Consumers of Electric Vehicles (%) Source: UBS. 2017. The capital expenditure (CAPEX) of an electric vehicle can be broken down largely into the cost of its battery (40%–50%), electric power train (about 20%), and other elements of the vehicle itself (30%–40%). The CAPEX of electric vehicles is significantly higher than of conventional vehicles. The purchase cost remains the most cited barrier to entry of potential customers. Also, many electric vehicles will require battery replacement (especially buses and trucks) during their commercial life span, thus incurring a significant replacement investment. Electric vehicle costs are declining rapidly due to cost reductions of batteries. Not only has the battery cost per kilowatt-hour (kWh) declined, but the battery energy density and the vehicle efficiency have also increased. This results in either longer driving ranges with the same battery pack or a smaller battery pack, thus reducing vehicle costs beyond the battery cost reduction per kWh. Another important component is that low-cost, fast-charging options have surged, thus allowing vehicles to use smaller battery packs with more frequent intermediate fast charging. A higher CAPEX of the vehicle can be recovered either through (i) lower operational expenditure (OPEX) and/or (ii) a longer lifetime of the vehicle. In the case of buses, for example, batteries are guaranteed as of 2018 by most manufacturers for 8 years with a state of charge of 80%. Electronic vehicles have a longer technical life span than conventional vehicles due to having fewer parts and less vibrations. Compared to fossil fuel vehicles, electric vehicles have better energy efficiency and far lower energy costs. These advantages result in lower maintenance costs due to less liquids used, fewer pre-emptive inspections, and less wearing out on mechanical parts that require replacement (including brake pads). However, electric vehicle tire usage is 20%–30% higher (due to increased weight and faster acceleration and de-acceleration), spare parts tend to be more expensive (due to lack of a secondary spare parts market), standstill times are often longer, and maintenance staff tends to be more expensive due to higher required qualifications. Including tires, overall maintenance costs of electric vehicles are around 60%–80% higher than conventional vehicles. While fuel costs can easily be determined for fossil fuel vehicles, the same is not true for electricity costs of electric vehicles. Electricity prices depend on the time the vehicle is charged and the power factor. Depending on the system configuration, electricity costs for an electric vehicle can vary by factor 3. An optimal system configuration of the battery pack on board the vehicle and the charging infrastructure is essential to reduce costs of electric vehicles, especially for commercial operators of buses and trucks. Electric Vehicle Policies Policies are often grouped into the price or financial incentives and nonprice measures. In countries with high electric vehicle uptake, both measures have been taken Financial incentives are given for vehicles as well as charging infrastructure either as direct subsidies, fiscal incentives, or reduced energy costs. Zero-emission vehicle mandate programs such as in California or the new electric vehicle policies in the PRC also result in financial incentives for electric vehicles as car manufacturers need to comply with specific targets, lowering the price of electric vehicles. Specific support for public charging infrastructure for passenger cars is considered as essential as a positive business case for private companies to become involved is difficult as long as electric vehicles account for a small share of total vehicles. A number of cities give special incentives for fleet programs including taxis, car-sharing services, or car rentals. This has been successful in increasing the market share of electric vehicles. Fleet operators send a demand signal to the market and act as amplifiers in promoting the uptake of electric vehicles by their staff and customers. Government fleets and fleets controlled through public regulations such as service vehicles, including garbage trucks and public transport buses, are also good targets for electric fleet policies. Nonprice incentives depend very much on the country and should be related to factors that influence purchase decisions of potential electric vehicle customers, including special lane access, parking perks, exemption from road and congestion charges, and exemption from driving and purchase restrictions. National policies are basically targeted toward fiscal incentives. The largest impact from fiscal incentives is achieved if the electric vehicle purchase premium is reduced. Nonfinancial incentives are developed at the municipal level and result in cities having a decisive influence in the adoption of electric vehicles. Policies that have been especially successful in this context include waivers on regulations that limit the availability of license plates (e.g., implemented in many cities in the PRC), exemptions from access to restricted urban areas, and exemptions from usage fees for road networks or parking fees. A different financial structuring can also be potentially an important tool for electric vehicle promotion, such as leasing. While capital costs are higher for electric vehicles, their operation costs are lower. Spreading out the initial investment over the commercial life span of the vehicle makes total annual costs of an electric vehicle for a customer similar to a conventional vehicle, as higher annual vehicle costs are matched with lower energy and maintenance costs. An important long-term policy is also a ban on fossil fuel vehicles. Countries such as India and the PRC have proclaimed plans to ban fossil fuel vehicles, with the earliest being Norway (targeting to ban fossil fuel vehicles by 2025), and many countries targeting from 2030 to 2040. Multiple cities have also announced plans to ban diesel vehicles, including Paris, Rome, and Madrid In most countries, policies are directed toward private vehicles, with limited attention given to commercial vehicles, although these would have a far bigger impact. Policies that could be deployed for promoting e-buses include requiring operators to have a gradually increasing share of e-buses in their fleets, requiring new licensed routes to be operated by e-buses, favoring e-buses in public tendering of routes, subsidizing charging infrastructure, implementing up-front purchase subsidies, limiting access to the city center to e-buses, supporting the creation of entities that purchase large fleets of e-buses and lease them to operators, and requiring all buses to be electric by a certain date. Similar policies can also be applied to (urban) truck fleets and to taxi and shared mobility operators. Recommendations It is recommended to structure electric vehicle policies and instruments around the three principles: focus, optimization, and incentives. Focus includes a concentration on high-mileage vehicles, on cities, and on large fleets. High-usage electric vehicles lead to a significant impact on the environment, particularly on lowering GHG emissions, while the financial profitability of such electric vehicles is better as the higher CAPEX is compensated quicker with lower operational costs due to the high mileage. This means targeting buses, trucks, taxis, mobility-as-a-service provider, car sharing, and rickshaws. A focus on electric vehicles used primarily in cities reduces the need for costly charging infrastructure and provides for the biggest impact for air pollution and noise as these are main concerns in urban areas. A focus on fleet managers and on large fleets reduces costs. Electric vehicle deployment can be more efficient through leasing companies and vehicle aggregators, especially in countries where transport service providers are small companies. Optimization refers to charging infrastructure, battery usage, and greening the grid. Optimizing the charging infrastructure together with the vehicle configuration reduces costs. Options include assessing the optimal mix between battery pack and charging type (slow, fast, or ultra-fast), solar charging systems, and especially for small island-states linking renewable grids with electric cars on a vehicle-to-grid base. Batteries can be a problem, but they can also be a possible solution. Second-life options of electric vehicle batteries are potentially an interesting source of revenue. Lead batteries, which are still often used in 2- and 3-wheeler electric vehicles, have a very limited life span and recycling them is often related with a large environment and health impact. Thus, incentives for lead-powered electric vehicles should be phased out. At an early stage, battery recycling and re-usage policies should be put in place, obliging vehicle vendors to take back batteries and use them in secondary applications or recycle them. An up-front recycling charge could be lifted on the sale of batteries, which then feeds into a recycling and re-usage fund. In countries with a grid factor of over 0.8 kilogram of carbon dioxide equivalent emission per kilowatt-hour, greening the grid should be the first priority. The impact of electric vehicles on GHG reduction in such countries will be small with high marginal abatement costs. Starting first with electric vehicles or greening the grid in parallel to promotion of electric vehicles is not considered an effective strategy since grid greening, in general, takes a lot of time due to the long life span of energy production units. Appropriate incentive structures include financial and nonfinancial incentives as well as a creative packaging of incentives. Financial incentives are critical toward reducing up-front costs and establishing charging infrastructures. However, an important parameter affecting electric vehicle profitability is also the fossil fuel price. Reducing fossil fuel subsidies and putting environmental taxes on fossil fuels will promote the shift toward electric vehicles and is equitable as it follows the polluter-pays-principle. Cities have multiple instruments at their disposal to promote electric vehicles, including city access restrictions, preferential lanes and parking access, preferential access for electric vehicles, and demanding increasing shares of electric vehicles in transport fleets. Such incentives can turn business models based on electric vehicle fleets profitable. For motorcycles, financial incentives have proven to be important but not decisive. Even if electric scooters (e-scooters) have the same price tag as conventional motorcycles, customers will still be reluctant to purchase them due to anxieties over range, speed, power, and reliability. The core nonfinancial incentive to promote e-scooters is clearly to ban fossil-powered motorcycles from entering cities. Incentives should be targeted toward vehicles with high impact and toward sustainable business models. Subsidizing public charging infrastructure in cities is a good start. Incentives are often too much targeted toward private-vehicle owners, with a limited impact and a high cost. Linking subsidies to vehicle usage and mileage is more efficient. Access to capital, guarantee schemes, and nonfinancial incentives should be explored next to traditional up-front subsidies, which have proven to be effective (if sufficiently high) but very costly. Financial subsidies to private electric vehicle owners should be fiscally neutral and be paid by fossil fuel car owners to avoid negative social impacts. Ask the Experts Ki-Joon Kim Former Principal Transport Specialist, Sustainable Development and Climate Change Department, Asian Development Bank Ki-Joon Kim has over 30 years of professional experience and academic research in the transport sector in Korea and the United Kingdom He has worked with public and private institutions on various transport and urban transport projects. He joined ADB in 2010 and worked on sustainable transport loan projects and technical assistance activities, including urban transport, public transport, climate change, and electric vehicle studies. Follow Ki-Joon Kim on Jürg Grütter Chief Executive Officer, Grütter Consulting AG Jürg Grütter has worked for more than 30 years on sustainable transport, linking climate finance with transport. He has helped develop GHG transport methodologies and more than 300 sustainable transport projects linked to climate finance. He was a member of the Technology Executive Committee and advisory board member of the Climate Technology Centre and Network of the UNFCCC as a representative of the Swiss government. Leave your question or comment in the section below: View the discussion thread.