COP27: Latin America

N.B. Central America and the Caribbean has been combined with South America for the purpose of this piece, due to most available research largely combining these areas.

In comparison to several other regions, Latin America’s transition to electric transport is seriously lagging. However, it is not all gloomy news; the region is now seeing growth in EV take-up, with 2021 being the first year where serious numbers of new EV registrations were recorded. Despite this, uptake is still very unevenly distributed throughout the region, and all nations, even those leading the regional pack, are still at the very start of their shift to electric. It will be important that countries across the America’s accelerate their respective transitions as soon as possible, especially given the problems with supply that they are likely to face in the short-medium term.

The State of the Switch: Electric Vehicle Uptake in Latin America

Latin America represents one of the smallest markets for new cars in the world, with the nations on the South American continent making up just 5.5% of global new car sales in 2020. Given this, it was never going to be the first region to electrify, and with supply currently lagging behind demand the continent has a fight on its hands to maintain shipments of EVs and improve its uptake figures.

It is difficult to find an accurate figure for the actual number of electric vehicles on the road in the region. However, according to BloombergNEF 25,000 EVs, including hybrids, were registered in Latin America during 2021. Around one third of those registrations were batter electric vehicles (BEVs).

Source: Statista

The top 3 countries in Latin America for EV new EV registrations for 2021 were Mexico, Colombia, and Costa Rica, registering 1,140, 1,296, and 1,045 BEVs respectively. In addition to these pure electric registrations, both Mexico and Colombia also saw some a significant number of hybrids registered in the same period, while Costa Rica bucked the trend, with no hybrids registered in the country at all during 2021. Despite being the second largest market for new car registrations overall, Brazil did not make the top three for EV registrations.

Policy Decisions

In terms of ambitious and forward thinking public policy, aimed at encouraging and incentivising the uptake of EVs, Latin America lags behind other parts of the world quite considerably. Only Chile, Brazil, and Mexico have national efficiency and fuel standards policies. However, these already limited policies are only applicable to new vehicles.

9% of the total used vehicles travelling to developing countries end up in South America, Central America and the Caribbean. Many of the countries that allow these imports have weak regulatory standards - as seen in the chart below. For the countries that have the weakest standards, as well as no other CO2 regulations for their parc, it is likely the coming years will see an influx of old polluting vehicles into their markets, as other areas transition to cleaner vehicles. 

Used Light Duty Vehicle Regulatory Environment (UNEP, August 2021)

However, there are a significant number of South American countries where the import of used vehicles is largely banned. This creates a different problem; although they will not become a dumping ground for polluting vehicles, they will be dependent on on the new vehicle market to supply EVs. In countries where the new vehicle market tends to be small, the transition could take an exceedingly long time to occur. The sweet spot may be to allow used some vehicle imports, but with heavy regulation on CO2 levels.

Incentives and Targets

As with other parts of the world governments have started to offer incentives, not only for electrifying passenger vehicles and vans, but other forms of transport such as buses. Along with the countries that have signed up to the COP26 agreement other countries have also set other ambitious targets in national plans. In Colombia, the government has a national strategy implemented in 2019 which includes targets for government fleets to be 30% EVs by 2025 and all buses in the country to be electric by 2035. In Ecuador all public transport vehicles will be electric by 2025 and in Chile 100% of freight transport and inner city buses will be electric by 2045.

In terms of monetary incentives on offer in Paraguay, EVs are exempted from import duty and VAT. This is a common incentive offered by a number of other countries in the region including Antigua and Barbuda, Argentina, Brazil, Colombia, Costa Rica, Ecuador, Mexico, Paraguay and the Dominican Republic. In a number of other countries including Colombia, Costa Rica, Ecuador, Mexico, and Paraguay there are also tax breaks offered on purchases. In a number of countries there are softer incentives for drivers, such as lowering tollbooth fees and parking charges, this is available in Colombia, Costa Rica and Ecuador.

Electric Innovators in Latin America

Although Latin American countries will not be the first countries to electrify their passenger vehicle fleets, they can lead the way in electric bus adoption. Many of the countries in Latin America have comparatively low levels of vehicle ownership and therefore there is a heavy reliance on public transport, especially buses. Nearly 81% of the population live in urban centres meaning many transport needs can be met from a well connected public transportation system and this can work to drastically reduce emissions. 

Chile and Columbia are home to the largest electric bus fleet in the world, outside of China with 849 in Chile and 1,589 in Colombia, with more plans for an expanded fleet. The total cost of ownership for these buses has now reached price parity with their diesel counterparts, and in some cases are already proving cheaper. According to E-bus radar, there are a total of 3,701 electric buses deployed in Latin America, across 11 countries and 30 cities. This is largely coming from innovative new business models, which have increased the financial viability of the vehicles -justifying higher upfront costs through lower maintenance and operational costs.

Next Step: Accurate Data & the Hybrid Problem

As with many underdeveloped EV markets, much of the available data on the transition in the region combines BEVs and hybrids together, leading to the inaccurate presentation of events. For example, BloombergNEF reported that 24,600 EVs were sold in Latin America - however over two thirds of these were hybrids. Going forward, it is essential that data separates these two distinct vehicle types. Hybrids previously had an important role in the transition as a bridging technology; this role should now be over. Many late comers to the transition, including Australia, fledgling markets in Africa, and Costa Rica in Central America, are now leap frogging hybrid technology and going straight to BEVs. Disappointingly, this is not happening in many Latin American markets. Future data needs to distinguish between the two vehicle types, so that the transition can be monitored with true transparency and accuracy.