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E-mobility and the untapped potential of emerging markets

David Isaiah considers the prospects for EVs in emerging markets

The e-mobility segment worldwide may be small at present, but its current growth is expected to continue. Some studies put the total number of electric cars on the roads worldwide at more than 700,000 units. The bulk of the sales have come in the last five years and in 2014, for instance, more than 300,000 EVs were registered globally.

Navigant Research expects EV sales in the light-duty vehicle segment to reach around 6.4 million units in 2023. This figure comprises hybrid EVs, plug-in hybrids and battery EVs. While stringent emissions standards and the demand for better fuel mileage are seeing more EVs on the roads, conventional vehicles are fighting back with new technologies aimed at improved fuel economy.

At present, the countries with the most number of electric cars on their roads include the US, Japan, China, France, Norway, the Netherlands and the UK. With the exception of China, the obvious pattern is that e-mobility is a concept that has secured a wider adoption with developed countries, rather than emerging markets such as Brazil, Russia or India.

One of the main factors, of course, is price – a natural deterrent in cost-conscious emerging markets. Another is the availability of recharging infrastructure upon which EVs rely.

Even with proper infrastructure, the segment suffers from range anxiety, owing to the limited range of these cars per charge, coupled with an incomplete infrastructure. This last factor, of course, is constantly improving.

According to KPMG’s Global Automotive Executive Survey 2014, around 40% of the respondents from the US, Western Europe and China feel that EVs could make up 11-15% of new vehicle registrations by 2029. Compared with the firm’s 2013 survey, respondents from Brazil were far more optimistic about the growth of e-mobility in their country, while respondents from Russia had lowered their expectations significantly. India, meanwhile, has the lowest projection of any of the major automotive markets, KPMG’s survey revealed.

In this article, Megatrends takes a look at the prospects for EVs in emerging markets, with a focus on Brazil, Russia and India.

Global ev stock
Source: IEA (EVI)


Julian Semple, a Senior Consultant and Manager at CARCON Automotive in Brazil, believes that e-mobility in Brazil will be a long time in coming. Sugar cane

“In 2014, a total of 855 EV or HEV (hybrid EV) light vehicles were sold in Brazil, which represents only 0.026% of total sales. In the first half of 2015, a total of 408 EVs and HEVs were sold, representing 0.032%. The top seller is the Ford Fusion HEV imported from Mexico, which benefits from the trade agreement between the two countries,” Semple told Megatrends.

One factor that is fairly unique to Brazil is the country’s focus on flex-fuel engines, which, as an alternative to conventional engines, could challenge any chance of e-mobility in the country. Furthermore, Semple explained that there has been opposition to EVs from Brazil’s sugarcane producers. Another question is whether Brazil would have the capacity to supply electricity to a large number of recharging stations. Brazil has experienced a drought in the last two years, and most of its electricity is generated by hydroelectric plants.

“Currently there are about 130 EV charging stations in Brazil, mainly energy companies such as CPFL and Itaipu Binacional. By 2017, these companies forecast that the charging stations will grow to 153, focused in the city of Curitiba and Campinas. The infrastructure for a country as big as Brazil is very small and limited to a few areas,” Semple says.

“EVs and HEVs are still very expensive in Brazil and there has been discussion in congress for a while to place incentives for EVs and HEVs, which would make them more competitive. But I don’t see EVs and HEVs taking off in Brazil in the near future. Perhaps, if the cost of hydrogen fuel cell vehicles can be reduced, that could be a good alternative for Brazil,” he told Megatrends. There are, however, some positive signs for electrification in Brazil. For instance, the electric bus segment seems to have the potential to expand in the near future.


Meanwhile, e-mobility in Russia is quite underdeveloped. Only a few thousand units are sold each year, including hybrids, plug-in hybrids and fully electric vehicles – and most of these are imported. With the price of gasoline in Russia still much cheaper than in many other countries, it is unsurprising that consumers continue to favour conventional ICE-powered vehicles at the expense of electric and hybrid alternatives.

“The Russian consumer generally does not find the electric vehicles on offer attractive due to a number of things. The infrastructure to charge the cars is insufficient and only being developed in large cities like Moscow; the price of e-cars is too high and the choice is not great; limited service offerings is also a problem, as well as the usual e-mobility concerns around the time needed to charge, and insufficient driving range,” says Ulrik Andersen, Partner at KPMG’s Moscow office.

While there has been a more active development of charging infrastructure, especially in big cities like Moscow, the levels are far from sufficient. Developments in recent years, such as cutting import tariffs on battery EVs from 19% to zero, show that the government is interested in promoting this vehicle segment, says Andersson.

Other measures that have been implemented or are being discussed by regulators include incentives for EV owners such as specific tax breaks, loan support, free parking and permission to drive in bus lanes, says Andersson. “Localisation of production and import substitution are buzz words these days. However, when it comes to e-mobility, this approach is flawed and somewhat backwards. You cannot apply a push-approach, certainly not in a market that is already repressed and where you have a product that is generally not accepted.”

Andersen believes that the government has to get consumers onboard and create a pull-effect, i.e. a demand-driven need for the production. Any other way during the difficult economic circumstances that the country finds itself in, says Andersson, will have very little effect.

“I am sure that e-mobility will slowly develop in Russia, albeit from a very low base, but my expectation is that it will be at a slow pace. Much hinges on the government’s support. It is not quite clear to what extent support is available and during these turbulent economic times, where state budgets are squeezed, it is difficult to imagine that e-mobility will suddenly be a major priority for the government, considering what else needs funding these days and what funding is actually available,” Andersen says.


The common factor that India has with other emerging markets is that demand for EVs is definitely muted. As a result, suppliers are also approaching e-mobility cautiously, adopting a wait-and-see approach. To make matters worse for this segment, India has been suffering from a delay in policy implementation, resulting in manufacturers struggling to meet sales targets. Mahindra Reva charging

“The electric vehicle industry is looking to the government to create an ecosystem conducive for market growth; however, since the announcement in 2010 by India’s Ministry of New and Renewable Energy (MNRE) of a Rs950m (US$15m) incentive scheme for manufacturers, things have not moved at the desired pace, leaving substantial ground to be covered in terms of building infrastructure and promoting the use of electric vehicles,” says Indraneel Bardhan, Managing Partner of EOS Intelligence.

The National Mission for Electric Mobility (NCEM), set up in 2011, launched the National Electric Mobility Mission Plan (NEMMP)-2020 in 2013 with the aim of investing about Rs140bn in the next eight years to create infrastructure and promote the use of EVs in the country.

It was estimated that about Rs200bn would be required to develop the market, with the industry contributing about Rs60bn. However, NEMMP-related government spending could start only in FY2015-16, wherein Rs10bn was earmarked for next two fiscals, Bardhan explains.

“It is expected that a majority of the government expenditure would be focused on providing monetary incentives to boost sales of electric vehicles. A scheme named Faster Adoption and Manufacturing of Electric Vehicles (FAME) under NEMMP was announced in this regard in early 2015.”

In India, e-mobility supporting infrastructure is currently a work-in-progress, with most electric vehicles at present being charged at home. Most charging stations have been, or are being installed, by Mahindra & Mahindra, the OEM that owns the Reva brand of electric cars. The cost of these cars is high as well, in India, owing to imported components. As a result, there can be up to 30-35% cost differential between an electric and ICE vehicle, according to EOS Intelligence.

China EV numbers
Source: IEA (EVI)

“Even if the government is able to cover time delay, the main challenge for the government as well as the industry would be to create customers for EVs amid declining conventional fuel prices. Gasoline prices have declined by about 10% in the past year and, with the Iran Nuclear Deal coming into effect, there is speculation that prices will drop further,” says Bardhan.

“Electricity availability may also be an inhibiting factor, as power cuts are regular in non-metro cities, and metro cities also witness power outages during peak demand periods. The government is working on an ambitious 24/7 power supply programme by 2019, which, if accomplished, may help in market expansion beyond metro cities.”

According to a McKinsey Global Institute study (published in 2011), 600 urban centres generate about 60% of global GDP. Over the next decade, while that number will remain unchanged, the membership will change; 136 new cities will join the list by 2025, “all of them from the developing world and overwhelmingly – 100 new cities – from China.”

The creation of 100 all-new cities in China and 36 others in emerging markets presents an opportunity to design the layout and infrastructure of those cities to favour EVs, and perhaps even at the exclusion of ICEs. With China leading the emerging markets in committing to reduce CO2 emissions, and its recent efforts to promote electrified and so-called ‘new energy vehicles’, e-mobility in emerging markets may currently appear an unachievable goal, but the potential and opportunities these markets present are vast.

This article appeared in the Q3 2015 issue of Automotive Megatrends Magazine. Follow this link to download the full issue.

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