Congested roads and polluted cities are synonymous with Asia’s mega-cities. The honking of horns and exhaust fumes characterize a region set to outpace the rest of the world in vehicle sales in the near future. Governments in the region are looking to EVs as part of a solution to the problem.
Major Asian economies want to develop and adopt EV technology and policies, as more and more citizens enter the middle class and become environmentally aware.
While China remains the world’s leader in EV usage, several Asian countries are following suit. The International Renewable Energy Agency estimates that by 2025, one in five vehicles on Asia’s roads will be electrified, including 59 million electric two- and three-wheelers and 5.9 million four-wheel vehicles. With demand comes opportunity.
“Thailand and Vietnam would be the two major forefronts,” Eric Yip, marketing director of Quantel, an Asian company focused on clean energy and electricity, told regional media. The market in Vietnam is growing, especially for electric motorcycles, known as e-motorbikes. And in Thailand, the EV market is expected to reach 1.2 million units within the next few years. “This makes Southeast Asia quite a big market,” Yip said.
Countries are encouraging car companies and trade groups to help make EVs more accessible to the people. In Vietnam, Vinfast, the country’s first carmaker, released a line of electric scooters. The Electric Vehicle Association of the Philippines set a target of 1 million EVs on the road by 2020. The country’s Department of Energy partnered with the Asian Development Bank to introduce e-tricycles that run on lithium-ion batteries. Singapore is winking at the idea of electric buses. In late 2018, its Land Transportation Authority awarded a tender to three companies for the first 60 electric buses.
Many Asian automakers are transforming and adopting EV technology, and some have started building components instead of an entire EV. Yip added that most of the key components for EVs, such as batteries, will soon be manufactured in Asia, possibly making the region a major global source for parts.
However, there are still hindrances before EVs overtake ICEs in the region, including higher tax rates on EVs, a shortage of charging stations and limited range. Analysts have suggested more government intervention is needed to drive growth of the sector, and Yip told the EE Times Asia in June 2019 that similar incentives such as London’s ultra-low emission zones, which charge certain vehicles an entry fee to drive in the city, could be a viable incentive.
“I believe that the Vietnam government is looking at moving in this direction,” he said. “To only allow electric vehicles on the roads of the cities. They are planning this soon.”
Since petroleum is relatively cheap and there is a lack of battery charging stations in certain Asian countries, some analysts said, it will be difficult for government legislation and regulations to work. Even if governments fast-track charging stations, at least five years are needed before the infrastructure is in place to handle demand.
The Chinese government to date has ploughed huge incentives into low- and zero-emission vehicle ownership and manufacturing, as well as clean energy. For example, EVs in China are not subject to registration restrictions or driving bans on certain days in certain cities. Purchase incentives have supported high demand for EVs in the country so far.
However, the big EV news from China in 2019 was the late March announcement that the country was scaling back on subsidies on EVs. The government said the move was meant to encourage local manufacturers to rely on innovation instead of handouts. Beijing said it intends to eliminate subsidies after 2020, but as of late October 2019, had not released the details.
The subsidy for BEVs with a driving range of 400 km and above was slashed by 50% to €3,700 from €7,300 per EV, according to the government, adding that to qualify for any subsidy an EV must have a driving range of at least 250 km. Purchase incentives are expected to be cut entirely after 2020.
Immediately after the roll-back announcement, stocks of China’s largest EV manufacturer fell nearly 4.2%, while another EV maker’s stocks fell 3.5%. BAIC Blue Park New Energy Technology Co. said it may increase EV pricing going forward amid “certain and even relatively huge” pressure on the sector.
“While financial support for purchases has fueled the rapid growth of China’s electric car industry, there are concerns that automakers have become overly reliant on them at the expense of developing new technologies and better vehicles,” Bloomberg reported.
EVs are also turning heads on the streets of South Korea, since a large number of motorists still cannot fathom the transition from an ICE vehicle to an EV because of economics, and limited designs of model have hampered sales.
The latest figures report there are only 59,600 electric cars being driven in South Korea and more than half of those were sold within the past two years. The market share of BEVs and PHEVs in the country is at just more than 2%, while there are more than 9,000 public chargers in the country.
Currently, South Korea provides generous incentives for EVs – an average of about $9,188 from the national government and additional amounts from provinces. They also enjoy a 50% reduction of tollgate fees and free or reduced parking at public parking lots. However, proponents of EVs said more is needed to encourage purchases and usage.
Demand for EVs in the country is reportedly high, but sales have been hampered by slow output from automakers and a cap on the number of purchases for which subsidies can be claimed. Seoul allotted for incentives for 42,000 units in 2019 and an increase to 55,000 units was proposed for 2020.
Across the Tsushima Strait, Japan has the third-largest fleet of plug-in vehicles in the world, after China and the U.S. The government aims to reduce vehicle greenhouse gas emissions by 80% by 2050 through a combination of hybrids, PHEVs, BEVs and fuel-cell vehicles.
The country’s investment in EVs is not new. Its postwar gasoline shortage gave birth to a small EV industry that in 1947 produced the Nissan Tama, an adorable cream-colored two-door mini-car. Now, Japan’s auto industry is famous for the world-dominating Toyota Prius, the bestselling hybrid ever, and the Nissan Leaf, which is cruising toward sales of half a million.
The government offers generous incentives, which stretch back to the 1990s, when it offered a 50% purchase subsidy. These days, the incentives are less enticing, but zero-emissions vehicle buyers still qualify for a grant of between $3,000 and $7,700, depending on the vehicle’s range. They also get half off the auto tax and a waiver of the tonnage tax.
Japan also has an extensive network of more than 40,000 charging stations, more than the number of gas stations, and there are plans to have a charge point every 15 km.
Lastly, the country is also considering cradle-to-grave implications of EVs. 4R Energy Corporation, a joint venture between Nissan and Sumitomo Corp, has opened a battery recycling plant to refurbish Leaf batteries in the town of Namie, devasted by an earthquake in 2011. Toyota intends to reuse retired batteries to power freezers and ovens in Japan’s 7-Eleven convenience stores.
Two countries where EV numbers are expected to skyrocket in the next few years are India and Indonesia, both in terms of manufacturing and consumption. Both countries have a burgeoning middle class and a desire to either increase or start a domestic EV manufacturing industry. But an obstacle stands in the way – relations with China.
Indonesia is pushing for the development of EVs and battery production facilities to create a downstream sector to exploit the nation’s rich deposits of nickel, which is used in lithium batteries. The country also hopes to start producing EVs in 2022, after a number of auto manufacturers, including Japan’s Toyota and South Korea’s Hyundai, announced plans to invest in the country’s nascent EV manufacturing industry. In July 2019, Toyota announced that over the next five years it plans to invest $2 billion, including EVs.
By 2025, the government estimates, EVs will have a 20% share in the nation’s auto market, which is dominated by two wheelers. Meanwhile, at the end of 2019, the government was putting the finishing touches to a luxury car tax plan to encourage production of low carbon-emitting cars, such as EVs. The country also offers tax holidays to companies manufacturing EV batteries.
In July 2019, India witnessed its worst month in passenger car sales in 20 years, as purchases plummeted 35% from the year before. But in the same month, the country’s bestselling carmakers – Maruti, Suzuki, Tata Motors and Mahindra – announced their EV plans. In a country where four-wheeler EVs account for 0.1% of India’s car parc, some met the announcement with arched eyebrows, including major shareholders in some of those companies.
Indian carmakers’ shift from ICE vehicles to EVs is in line with a very ambitious government target announced in 2017 of 100% new EVs sold by 2030. This was walked back to 30%, but it is still a lot of vehicles. This includes three-wheelers manufactured in India by 2023 and two-wheelers with an engine output equivalent to less than 150 CC by 2025, according to Indian news outlets. The government said the reason for the shift was to curb rising air pollution and mitigate dependence on imported oil. The country is the world’s fourth-largest car market and has some of the most polluted cities on Earth.
Trying to advance EVs is nothing new in India. A decade ago, the Ministry of New and Renewable Energy gave incentives to carmakers to produce EVs. Then in 2015, the administration of Prime Minister Narendra Modi earmarked $140 million for infrastructure development, incentives, research and development and pilot projects.
Then in 2019, Modi’s budget reduced the federal sales tax on EVs from 12% to 5% and on chargers from 18% to 5%. Additionally, EV buyers were given exemptions on certain taxes, and import duties on lithium-ion cells were removed.
Modi’s action has caused jitters among the car industry, which constitutes about 15% of India’s economy. The industry voiced concerns over time frames for transition from ICEs, while complaining about the lack of charging infrastructure.
“The response forced the government to soften its stance and clarify that its policies would allow internal combustion engines vehicles and EVs to coexist and grow,” according to an article in This Week in Asia.
Given the opposition from the powerful and well-funded Indian auto lobby, sector analysts predict the adoption of EVs in the market is still a fair way off and are wary of the government’s timeline for EVs cruising the streets of New Delhi and Mumbai.
The analysts said the pace of reform is too fast for EV manufacturers, infrastructure and resources. For example, in March 2019, the Modi administration mandated EV manufacturers should produce 50% of their components locally to benefit from subsidies, which proved to be a hard punch for the market. In response, EV sales slumped from 12,000 a month in March to just 300 in April, according to the Society of Manufacturers of Electric Vehicles.
“An industry which is not even 1% of market share cannot possibly replace the sector 100% within three years,” said Alok Ray, assistant director of the Society of Manufacturers of Electric Vehicles. “What we need are more subsidies, robust models for consumers, a cleaner road map like setting up charging centers and unambiguous regulations to streamline the commercial usage of vehicles.”64
Indian media reported Modi’s government plans to target India’s 10 most-polluted cities, including Delhi, Bangalore and Gurugram, which host about one-third of the nation’s vehicles.
“I will not say it is sustainable in terms of short-term goals – it is more of a vision from the government’s side. Even the major auto players are not wholeheartedly supporting [the government’s initiatives], and consumers are not fully ready to embrace EVs,” Puneet Gupta, advisor at market research firm IHS Markit, told local media. “Most of the auto giants are still keeping EVs as a backup option as the industry is still nascent, and they do not know how it will shape up regarding [government] policies and investments.”
Before either Indonesia or India can become giant players in the EV business, they need China’s blessing, the region’s biggest economy and EV producer. Over the past 10 years, some analysts estimate that China has pumped $60 billion into its domestic EV industry and now controls between half and three-quarters of the global supply of raw materials for EVs, according to a study by the Yano Research Institute.
China had more than 1 million EV sales in 2018 (more than all other countries combined), is home to 99% of the world’s 250 million electric scooters and has 99% of the globe’s electric buses, according to a number of sources. The country is positioning itself to become the hub of the global EV battery market, which makes up approximately half of an EV’s total cost, in 2019.
“It’s very important for the governments to take the necessary steps to promote indigenous manufacturing of lithium-ion cells for EV batteries,” said Sri Harsha Bavirisetty, chief operating officer at Gayam Motor Works, adding that Beijing controls the vast majority of lithium and cobalt – two vital minerals for EV batteries – through joint ventures or outright purchasing of mines in Congo, Chile, Bolivia and Australia, leaving other carmakers, such as Tesla, far behind.
Not a great deal is happening down under in the EV scene. No cash is on the table for buyers, only tax breaks worth in the hundreds of dollars. The New Zealand government’s Electric Vehicles Program aims to get 64,000 EVs on the road by the end of 2021, but it only offers EVs exemption from road user charges until they make up 2% of the fleet and reduced national accident compensation fees. Australia’s EV incentives are virtually non-existent beyond breaks on luxury car tax and stamp duty. An outgoing Labour government had pledged to develop an EV policy but failed to win the 2019 election, and the policy evaporated.