COP27: Asia

As the largest continent on the planet, it makes sense that the various countries of Asia are at vastly different stages of their transition. Asia is home to the country leading the global transition to electric vehicles - China. It is also home to several countries that are innovatively adapting their transitions to suit their own needs, and a few nations that have not even started their electrification of road transport. Asia has the raw potential to, as a collective, lead the world in electrification. The continent is expected to bear the brunt of the effects of climate change in the coming decades, and so the stakes for the Asian nations could not be higher. This piece will explore several countries, from different parts of the continent, and provide a snapshot of their respective transitions.

In Focus: The Middle East

The Middle East is currently trailing behind larger, more developed markets in terms of electric vehicle uptake. In a recent study on global electric mobility readiness, the UAE was the only representative from the region to make the top ten ranked nations. However, despite having to historically rely on vehicle imports, the region is starting to emerge as an EV manufacturing haven. In the cities of Dubai and Abu Dhabi, several manufacturing hubs have sprung up over the last few years. Despite the region's wealth being deeply tied to the export of oil, EVs are becoming more and more popular. However, as the graph below shows, EV uptake is still relatively low in the region.

Source: Albawaba Business

In Focus: South Asia

South Asia as a whole represents a tiny part of the global EV market. There has been has been limited progress towards electrification so far in many of South Asian countries. However, there are some creative start-ups and forward thinking governments working to address this issue, and it may quickly piggyback off the progress of other countries to become an EV hub. This is especially true for the largest country in this area: India.

Case Study: India

India is a large country, with low rates of car ownership but high rates of vehicle ownership. For many drivers in India, two or three wheelers are the vehicle of choice. 70% of vehicle sales around the world are for 2 or 3 wheelers, and in India they account for 80% of all vehicle sales. This means that any strategy for the electrification of transport, especially in India, must include this segment of the market. As well as being a highly motorised country, the country has a large manufacturing industry. In 2020, 22,700,000 vehicles (across all vehicle type) were produced - making India the fifth largest automobile producing country in the world. A total of 2.3% of India’s GDP comes from this industry, and it accounts for 8% of all exports coming out of India.

Electric Vehicle Uptake

Of all vehicle types common in India, it is 2 wheelers that have made the most rapid progress towards electrification. A strong government incentive programme means this segment of the electric vehicle market is thriving.

However, there are issues around accurately tracking the electrification of this vehicle type. A significant segment of this market is ‘slow vehicles‘ - of 34 new E-bike models introduced in 2021, 19 were low speed vehicles. These vehicles do not go above 25 miles an hour and are both easily accessible and affordable. They do not need to be RTO registered (have a VRN), nor do drivers need a licence to drive them. This represents a significant problem for tracking how many are using India roads. Another significant segment of the market in India are high speed scooters. Overall, 234,000 2 wheeler EVs were bought in India for 2021. Of those 143,000 were high speed and 91,142 were low speed vehicles. The fastest growing sector was high speed vehicles, which accounted for 61% of the new scooter market in 2021.

Policy

Although individual states have their own incentives in place, the federal government offers a nationwide incentive programme. It is administered by the Ministry of Heavy Industry National Automotive Board (NAB). Only registered vehicles are eligible - so low speeds bikes are excluded from the scheme. The aim of the support is to facilitate the roll out of 7,000 e-buses, 500,000 EV 3 wheelers, 55,000 EV 4-wheelers (including hybrids) and 1 million electric 2-wheelers by May 2024. Vehicles need to meet certain technical criteria in order to be eligible.

The scheme is focused on vehicles used for commercial purposes, especially for public transportation. The figures vary, but up to 40% of the vehicles total price can be subsidised through the scheme. There are varying views on how successful this has been; some reports say it has driven the 2-wheeler EV boom, whilst others report that it has had a fairly low level impact on of EV uptake.

Conversions

India is the poster child for converting old polluting vehicles into new EVs. This is an effective way to bypass the global shortage of EV supply. The types of vehicles that are targeted by businesses for conversion tend to be 2-3 wheelers, as well as vans. The aim is to extend the life of the vehicles, and vehicles chosen for conversion are often those that are at the end of their first working life and are about to be scrapped. Many of these vehicles are used for commercial purposes, so conversion is often advertised as a cost effective way to extend the life of a vehicle that is relied upon for income.

Next Steps

The Indian government must continue to prioritise electrification and drive toward its target of a 2040 phase-out date. Many new and innovative businesses have already been born out of this electrification, and they must be given supported to continue to grow. These businesses represent a significant economic opportunity for India, as the country tailors the transition to supports its own needs and priorities.

In Focus: East Asia

East Asia has seen significant growth in EV uptake, and is home to large manufacturers, with many based in South Korea, Japan, and China. China and South Korea especially are manufacturing and distributing EVs at an ever increasing rate. One country in the group that is lagging behind somewhat is Japan. They have bet on hybrids and hydrogen, and are currently failing to capitalise on electrification.

Case Study: China

You cannot talk about the global EV market without talking about China. The country represent 45% of global sales, an absolutely enormous percentage, and is seemingly still growing its lead over other regions. Chinese manufacturers are now gaining popularity internationally and represent a significant threat to incumbent manufacturers. Projections for 2022 see Chinese manufactuers seizing a 60% share of the global EV market toward the end of this year. Where the European market seems to be stagnating, EV uptake in China continues to boom.

Electric Vehicles Uptake

So, just how many EVs are there on Chinese roads? In 2021, 2.92 million EVs were sold in the country. It is predicted that over 2022 a further 6 million vehicles will join them on Chinese roads. EVs market share in China sat at just below 18% over the first half of this year. This is a jump of 169% from 2020. Tesla is still the most popular EV brand in the country. However, home grown manufacturers now represent a significant part of the market. In fact, Tesla’s introduction to the Chinese market in 2014 had the effect of boosting the market for home grown EVs.

Incentives

There are a number of incentives for EVs in China. Most were introduced in 2009, and were due to expire this year. However, these incentives has since been extended. These programmes are extensive and expensive for the government; the total cost to the taxpayer is estimated to be over $14 billion overall. This prompted speculation over whether they would be extended. However, it was announced in September that the government was extending the programme for another year, and certain EVs listed by the government remain eligible for a tax exemption.

NEV Mandate

China created a New Energy Vehicles mandate in 2019. This was modelled on the Californian ZEV Mandate. This mandate has followed a linear model, and credits are based on the range of the vehicle and energy efficiency. The mandate has a cap of 6 credits per vehicle. EV take-up in China is outperforming the NEV Mandate considerably, having already matched the market share outlined as a target for 2023. This means it is currently functioning as more of a backstop than a market pushing instrument. 

The NEV mandate is a dual credit programme, acting in tandem with Chinese CO2 regulations. Credits can be traded between the two regulations. Because it is a dual credit system, there are concerns that BEVs used by manufactures in order to offset the production of vehicles that have high CO2 emissions. This means ZEVs could essentially subsidise the production of high end, carbon intensive vehicles. California’s ZEV Mandate did start off as a dual credit system but this was phased out due to these concerns. China is yet to address this issue.

Next Steps

Over the coming period, the Chinese government will likely seek to decouple its growing EV market from the incentive programmes that have previously helped drive take-up. Additionally, It will likely seek to consolidate itself as a leader in electrification, both in terms of EVs on its roads and as a manufacturer. At the present time, it is difficult to see any credible threat to the country’s position as the world leading jurisdiction for electric transport.