Adoption of EVs in Developing CountriesBy Shankar Subramanian, Product Owner at Otoz on 20-07-2022
EVs have numerous benefits over traditional ICEVs, including lower emissions, cheaper operating costs, and less maintenance. Despite these advantages, EVs have been slow to catch on in developing countries due to a lack of infrastructure and high upfront costs. However, this is beginning to change as more charging stations are being built and battery prices are falling because of rapid technological advancements. Government incentives are also playing a role in boosting EVs sales.
An Electric Vehicle (EV), often known as a battery-powered car or an all-electric car, is a vehicle that is powered entirely by electricity stored in batteries. EVs emit no exhaust emissions because they do not have a tailpipe and are quieter than internal combustion engine vehicles (ICEV). They significantly improve air quality, especially in congested, highly populated cities. EVs have proven beneficial for the environment and offer reduced maintenance and fuel costs. Through different initiatives, incentives, and policies, various governments in developed countries have been successful in making the adoption of EVs possible.
However, due to poor infrastructure, economic instability, and substandard supporting environments, EVs face several barriers to adoption in developing countries nations. First, EVs are generally more expensive than ICEVs. This is due in part to the high cost of batteries. Second, EVs require a well-developed infrastructure of charging stations. In many developing countries, this infrastructure is still in its early stages of development. Third, EVs may require changes to government policies and regulations. For example, subsidies or tax credits may be necessary to make electric cars more affordable. Finally, lack of awareness and information about EVs is also one of the major barriers wide scale adoption of EVs face. Overcoming these obstacles will be essential for EV adoption in developing countries. The present article aims to shed light on some of the challenges developing countries face in adopting EVs at a large, considerable scale.
EVs are becoming increasingly popular in developing countries, but their high price tag remains a barrier to adoption in developing countries. While the initial cost of an EV is higher than that of an ICEV, EVs are cheaper to operate and maintain over the long term. However, in developing countries where many people live on subsistence incomes, the high upfront cost of an EV is often prohibitive.
For instance, in Thailand, EVs are often deemed expensive due to a lack of an economy of scale, which leads to consumers paying a much higher price than ICEVs vehicles (Kongklaew et al. 12839). Similarly, in Indonesia, EV adoption has been slowed by high costs.
Even with subsidies that can decrease initial costs by 40%, the lowest price for an EV in Indonesia is more than twice that of most ICEVs. ("Indonesia Has Set an Ambitious Target for EVs: What Factors Can Support the Nation's Shift to an Electric-Dominated Transport Sector?").
Lack of Infrastructure
In developing countries, EVs are often not a viable option due to poor infrastructure. EVs require a reliable and strong electrical grid to charge the batteries, and many developing countries lack the infrastructure to provide this.
In addition, EVs require specialized charging stations, which are often not available in developing countries.
This causes range anxiety among people. EV range anxiety is a developing problem in countries with poor infrastructures. This is because, in order to recharge an EV, access to functioning charging stations is required - something which is not always available in lesser developed nations. Furthermore, even when access to these charging stations is possible, the process of recharging an EV can often be slow and unreliable.
This leaves EV owners feeling anxious about their range, as they fear being stranded without a working vehicle. As a result, EVs are not a viable option for many people in developing countries, who rely on more traditional forms of transportation.
Such is the case for Malaysia, where there are only a handful of charging stations, most of which are located in the capital city of Kuala Lumpur. Given that EV range is a significant concern for people unwilling to switch to EVs, having a poor charging infrastructure proves to be one of the main hurdles to the widespread adoption of EVs in Malaysia. There are currently fewer than 20 DC chargers installed in Malaysia, according to the Malaysian Vehicle DCFC network.
This figure remains far from the association's goal of installing 1,000 DC chargers nationwide by 2025.
Government Policies and Regulations
Poor government policies and lack of incentives have severely hampered EV adoption in developing countries. In many cases, subsidies have been in the form of rebates, often meagre, or are available only for luxury EVs, which are beyond the reach of most consumers. In addition, tax exemptions and other incentives have not been well-publicized, making it difficult for people to take advantage of them. Furthermore, various developing countries gave incentives based on outdated assumptions about the costs and benefits of EVs. As a result, they have failed to attract buyers or encourage manufacturers to produce EVs in sufficient quantities.
The result is a vicious cycle in which low EV sales lead to high prices and low production levels, reducing EV sales even further.
The Singapore government has been offering a range of incentives to encourage the adoption of EVs, but these have not been well received. Many of the incentives are in the form of rebates and subsidies, which are often not very generous. In addition, the process for applying for these incentives is often complicated and time-consuming. As a result, few people have actually taken advantage of them. In addition, the government has also imposed a number of restrictions on EVs. For example, they are only allowed to be used on certain roads and highways, and there are limits on where they can be recharged. These restrictions make it difficult for people to use EVs as their primary mode of transportation. As a result of these poor government incentives, the adoption of EVs in Singapore has been very slow.
Poor EV adoption in Malaysia is also a result of many factors including poor government policies. The Malaysian Government has set a target of 30% adoption by 2030, but has not put in place policies to support this target. Regulations surrounding the importation, registration and use of EVs are not well defined, making it difficult for consumers and businesses to make the switch from ICEVs. Incentives for buying and using electric vehicles are also low, meaning that the cost-savings associated with making the switch are not significant enough to encourage widespread adoption. Poor EV infrastructure is another barrier to adoption, with a lack of charging stations and long recharge times making it impractical for many people to own an electric vehicle. Poor government policies are therefore a major reason why EV adoption in Malaysia has been slow.
To break this cycle, governments must provide more attractive EV ownership and production incentives. Only then can EVs hope to attain the level of market penetration necessary to impact transportation in developing nations significantly.
Lack of Awareness
One of the main reasons developing countries are lagging behind in the adoption of EVs is due to a lack of awareness about the benefits of EVs and the associated cost saving potential. The benefits of EVs include not only monetary savings, as EVs are cheaper to maintain than ICEVs, but also environmental benefits, as EVs produce zero emissions. In addition, EVs have the potential to improve energy security by reducing dependence on imported oil. The lack of information about these benefits is a major obstacle to wide-scale adoption of EVs in developing countries.
Taiwan's EV market remains underdeveloped compared to other countries in the region despite the Taiwanese government's efforts to promote their use. One of the primary reasons for this is the lack of awareness about EVs among the general public. A survey conducted by the Taiwan Transportation Safety Board found that only 3% of respondents had a good understanding of EVs, while 38% said they knew "a little" and 59% said they knew "nothing" about EVs. This lack of information is likely due in part to the fact that Taiwan does not have any domestic EV manufacturers, so there is no built-in marketing for EVs as there is in other countries.
Developing countries need to invest in public education and awareness campaigns to inform citizens about the potential benefits of EVs and dispel myths about EVs that may be preventing people from considering them as a viable option for personal transportation. Only then will developing countries be able to fully realize the potential of EVs to improve transportation options and reduce environmental pollution.
EV Adoption in Europe: A Roadmap for Developing Countries?
Globally, major European countries are leading the way in EV adoption, with sales increasing rapidly in recent years. A number of factors have contributed to this trend, including Europe's strong focus on reducing emissions, its supportive policies for EVs, and the growing availability of charging infrastructure. Europe is also home to a number of major automakers that are investing heavily in EV technology, which is helping to drive down costs and increase consumer awareness.
For instance, in Germany, the government offers favorable incentives for EVs. The Federal Office for Economic and Export Control reported that the German state spent a total of €3.1 billion to subsidize the record purchases of EVs in 2021.
In Norway, the government has been investing in charging station infrastructure so drivers around the country can switch to EVs without any range anxiety - the fear of driving an EV and running out of power, without being able to find a charging station. There are already over 16,000 public charging stations available in Norway, and this number is expected to continue to grow.
In the U.K., EV adoption is on the rise, with the government investing in infrastructure to support this growth. In 2021, there were over 500,000 registered EVs in the UK, up from just over 3,000 in 2013. This increase is due in part to government incentives and improved infrastructure. The UK government offers a grant of up to £2,000 for the purchase of a new EV, and has committed to investing €1.3 billion to improve charging infrastructure by 2030. EVs are also exempt from road tax and congestion charges. As a result of these factors, it is estimated that EVs will make up 30% of new car sales in the UK by 2030.
Additionally, many drivers are still unaware of the benefits of EVs, and various governments in Europe are working to increase awareness of the technology. In particular, the Swedish government is focusing on educating drivers about the financial and environmental benefits of EVs.
EVs have numerous benefits over traditional ICEVs, including lower emissions, cheaper operating costs, and less maintenance. Despite these advantages, EVs have been slow to catch on in developing countries due to a lack of infrastructure and high upfront costs. However, this is beginning to change as more charging stations are being built and battery prices are falling because of rapid technological advancements. Government incentives are also playing a role in boosting EVs sales. In China, for example, EVs are eligible for a 20% tax break, while in India they are exempt from taxes altogether. As EVs become more affordable and accessible, it's likely that the tide will turn and EV adoption will start to increase in developing nations.
NETSOL has been proudly serving automotive finance and leasing companies worldwide with smart software technology for over four decades and is itself closely monitoring how the wide-scale adoption of EVs in developing countries starts to affect the global automotive market. To explore the company's modern technology solutions for the evolving global automotive finance and leasing industry, please click here.
Shankar Subramanian, Product Owner at Otoz
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