The economics of elecTric Vehicles for Passenger TransPorTaTion

Rogge, Matthias, Sebastian Wollny, and Dirk Uwe Sauer. 2015. “Fast Charging Battery Buses for the Electrification of Urban Public Transport—A Feasibility Study Focusing on Charging Infrastructure and Energy Storage Requirements.” Energies 8 (5): 4587–606. https://doi.org/10.3390/en8054587.

Sahoo, Anshuman, Karan Mistry, and Thomas Baker. 2019. “The Costs of Revving Up the Grid for Electric Vehicles.” Boston Consulting Group, December 20, 2019. https://www.bcg.com/pl-pl /publications/2019/costs-revving-up-the-grid-for-electric-vehicles

Saygin, Değer, Osman Bülent Tör, Saeed Teimourzadeh, Mehmet Koç, Julia Hildermeier, and Christos Kolokathis. 2019. Transport Sector Transformation: Integrating Electric Vehicles into Turkey’s Distribution Grids. Istanbul: SHURA Energy Transition Center.

Sovacool, Benjamin K. 2017. “Reviewing, Reforming, and Rethinking Global Energy Subsidies: Towards a Political Economy Research Agenda.” Ecological Economics 135: 150–63.

Suski, Adam, Tom Remy, Debabrata Chattopadhyay, Chong Suk Song, Ivan Jaques, Tarek Keskes, and Yanchao Li. 2021. “Analyzing Electric Vehicle Load Impact on Power Systems: Modeling Analysis and a Case Study for Maldives.” IEEE Access 9: 125640–57. https://ieeexplore.ieee.org/stamp/stamp.jsp ?arnumber=9530709

Taljegard, Maria, Lisa Göransson, Mikael Odenberger, and Filip Johnsson. 2019. “Impacts of Electric Vehicles on the Electricity Generation Portfolio—A Scandinavian-German Case Study.” Applied Energy 235 (1): 1637–50. https://doi.org/10.1016/j.apenergy.2018.10.133

Unidad de Planeación Minero-Energética. 2020. Plan Energético Nacional 2020–2050: La Transformación Energética que Habilita el Desarrolla Sostenible. Bogatá: Unidad de Planeación Minero-Energética, República de Columbia. https://www1.upme.gov.co/DemandayEficiencia/Documents/PEN_2020_2050/Plan _Energetico_Nacional_2020_2050.pdf

Weiss, Martin, Kira Christina Cloos, and Eckard Helmers. 2020. “Energy Efficiency Trade-Offs in Small to Large Electric Vehicles.” Environmental Sciences Europe 32: Article 46. https://doi.org/10.1186 /s12302-020-00307-8

Zhang, Fan. 2019. In the Dark: How Much Do Power Sector Distortions Cost South Asia? South Asia Development Forum. Washington, DC: World Bank. https://openknowledge.worldbank.org/handle/10986/30923

Zhang, Jing, Jie Yan, Yongqian Liu, Haoran Zhang, and Guoliang Lv. 2020. “Daily Electric Vehicle Charging Load Profiles Considering Demographics of Vehicle Users.” Applied Energy 274 (September 15): 115063. https://doi.org/10.1016/j.apenergy.2020.115063.

Vehicle fleet composition: Car dominant

Net oil trading status: Exporter

Relative cost of vehicles: High

The dominant vehicle type in Brazil is cars (84.3 percent), followed by two-wheelers (14.5 percent), buses (1.0 percent) and three-wheelers (0.2 percent) (ANFAVEA 2020). In 2021, electricity was generated primarily from renewable sources (85 percent)—notably, hydro (65.2 percent), wind (8.8 percent), solar (0.6 percent), and biomass and waste (9.1 percent). Gas (8.3 percent) is the largest fossil source for electricity generation, followed by oil (2.1 percent) and coal (2.7 percent).1 Brazil is one of the largest vehicle manufacturers in the world, with its own large domestic market. The expansion of electric vehicles in the country has been slow (Marchán and Viscidi 2015) partly because of the country’s prioritization of ethanol to mitigate carbon dioxide emissions from the transportation sector. In 2019, more than 92 percent (Costa 2020) of the Brazilian cars sold were powered by flex-fuel.2 More recently, e-mobility implementation in Brazil has been ramping up, on both the policy side and infrastructure supply. Electric buses are tax-exempt in seven Brazilian states, with a reduced tax rate in three further states. From 2022, national electric bus manufacturers are fully tax-exempt for bus chassis assembly machines and lithium-ion batteries, but import duties to electric vehicles remain in place. These incentives are sponsored by the National Development Bank (UNEP and European Union 2016). However, the Brazilian manufacturing industry produces diesel buses at very low cost, which makes for a tough competitive market despite said incentives.

Brazil faces many conditions that are less favorable toward electric mobility, including a car-dominated fleet, relatively high-cost vehicles, and energy-exporting status (figure A.1.1a). Although electrification of transportation does not yet look economically favorable as a national strategy, this is largely driven by the fact that the electrification of four-wheel vehicles is not attractive under current conditions, given large capital cost differentials (table A.1.1). By contrast, there is a strong case for adoption of two-wheel electric motorbikes (figure A.1.1b), which present a life-cycle cost advantage of almost 14 percent (almost 26 percent in financial terms). In addition, the 8 percent capital cost differential associated with electric two-wheelers looks relatively affordable, representing no more than 1 percent of gross national income per capita. Furthermore, electric buses are beginning to offer modest economic advantages to the order of 3.5 percent of life-cycle cost.

The externality benefits of electric mobility in Brazil are relatively small (figure A.1.1c), perhaps because of the existing prevalence of biofuel. An important exception is provided by two-wheel electric vehicles, which present much lower externalities than their conventional counterparts (figure A.1.1d). Otherwise, fuel cost savings are the main advantage associated with electric mobility in Brazil. Given a fiscal regime that taxes gasoline and diesel two to three times as heavily as electricity, these fuel cost savings are accentuated in financial terms, which is why the overall case for electric mobility in Brazil looks better in financial than in economic terms (figure A.1.1a).

The total investment needs associated with the 30×30 scenario amount to US$7 billion per year by 2030 (or 0.27 percent of Brazilian gross domestic product). About three-quarters of the required outlay is associated with the incremental capital cost of electric vehicles (figure A.1.2a). In terms of public investment, the most significant item is the provision of public charging infrastructure for private vehicles (figure A.1.2a). Given that implicit carbon prices associated with electric two-wheelers and buses in Brazil are negative (see table A.1.3), there is significant scope to cover 50–70 percent of public investment costs through carbon financing arrangements (figure A.1.2b). However, for four-wheel electric vehicles, the implicit carbon price exceeds US$200 per ton.

The overall economic case for electric mobility in Brazil certainly does not improve under more conservative assumptions about the cost of batteries (“scarce minerals” scenario) and the fuel efficiency of internal combustion engines (“fuel efficiency” scenario), nor is there much scope for further decarbonization of the power sector (“green grid” scenario) table A.1.2. On a positive note, the emerging advantage associated with electrification of buses can be as much as doubled through the more efficient procurement and operation of vehicles (“efficient bus” scenario). However, there is no real case for electrification of four-wheelers even when it comes to taxi fleets and other intensively used vehicles (“taxi fleet” scenario). If the appropriate road safety measures are in place, the two-wheel segment of the fleet is an enormous opportunity and should be prioritized for Brazil, given the many strong advantages.

Figures and tables start on the next page.

Source: World Bank.

Note: Data in this figure represent the “business as usual” (BAU) scenario minus the 30×30 scenario (averages over fleet additions). The BAU scenario assumes that no policy target will be imposed for electric vehicles and that vehicle purchase decisions will continue to reflect historical trends. The 30×30 scenario assumes that sales of electric cars and buses will reach 30 percent, and of two- and three-wheelers, 70 percent, by 2030. 2W = two-wheeler; 4W = four-wheeler; CO2 = carbon dioxide; EV = electric vehicle; NOx = nitrogen oxides; PM10 = particulate matter less than 10 microns in diameter; SOx = sulfur oxides.

Source: World Bank.

Note: Heading colors: blue = excluding taxes and subsidies, gray = fiscal wedge, green = including taxes and subsidies. 2W = two-wheeler; 4W = four-wheeler; “Local externalities” comprises local (NOx, PM10, SOx) air pollution costs. “Global externalities” comprises global (CO2) air pollution costs. CO2 = carbon dioxide; NOx = nitrogen oxides; PM10 = particulate matter less than 10 microns in diameter; SOx = sulfur oxides. Red and parentheses indicate negative value.

a. Breakdown of investment needs (US$7,009 million or 0.27% of GDP) b. Investment needs potentially covered by carbon financing

Private incremental vehicle cost 4Ws

Public charging infrastructure 3Ws and 4Ws

Public charging infrastructure e-bus

Public incremental vehicle cost e-bus

Private charging infrastructure

Private incremental vehicle cost 2Ws and 3Ws

Source: World Bank.

Note: Data in this figure represent the “business as usual” (BAU) scenario minus the 30×30 scenario (averages over fleet additions). The BAU scenario assumes that no policy target will be imposed for electric vehicles and that vehicle purchase decisions will continue to reflect historical trends. The 30×30 scenario assumes that sales of electric cars and buses will reach 30 percent, and of two- and three-wheelers, 70 percent, by 2030. 2W = two-wheeler; 3W = three-wheeler; 4W = four-wheeler; EV = electric vehicle; GDP = gross domestic product.

Source: World Bank.

Note: Data in this table represent the “business as usual” (BAU) scenario minus the named scenario (averages over fleet additions). The BAU scenario assumes that no policy target will be imposed for electric vehicles and that vehicle purchase decisions will continue to reflect historical trends. The 30×30 scenario assumes that sales of electric cars and buses will reach 30 percent, and of two- and three-wheelers, 70 percent, by 2030. The green grid scenario assumes that countries achieve certain region-specific targets for acceleration of renewable energy, as defined by the International Renewable Energy Agency (IRENA 2020). The scarce minerals scenario assumes that battery cost will decline by approximately 7 percent annually. The fuel efficiency scenario assumes that the rate of improvement of fuel efficiency for the internal combustion engine fleet will double from 15 percent to 30 percent. The efficient bus scenario assumes a capital cost reduction of 35 percent in the procurement of buses as well as optimized bus routes to increase the annual mileage of electric buses. The taxi fleet scenario assumes that the lifetime mileage of intensively used commercial vehicles will increase by four times in each country, that public investment in charging infrastructure will double the fast charger density for cars, and that the maintenance cost for cars will be doubled (assuming two lifetime battery replacements). Results have been normalized by new vehicles entering the market in 2030. The “fiscal wedge” comprises net taxes and subsidies. Red and parentheses indicate negative value. 2W = two-wheeler; 4W = four-wheeler; CO2 = carbon dioxide; EV = electric vehicle; NOx = nitrogen oxides; PM10 = particulate matter less than 10 microns in diameter; SOx = sulfur oxides; US$/Mpaxvkm = US dollars per million passenger vehicle-kilometers; n.a.= not applicable.

TABLE A.1.3 Supporting information on parameters and results for EV adoption in Brazil

Overall investment needs (US$, millions)

—of which 4W purchase

—of which 2W purchase

—of which e-bus purchase

Fiscal impact (US$, millions)

—of which vehicle duties

Other

—of which vehicle taxes/subsidies

—of which gasoline taxes/subsidies

—of which

—of

Implicit

—of which for 4W

—of which for 2W

—of which for buses

Pollution

—of

—of which global (CO2)

Source: World Bank.

Note: Red and parentheses indicates negative value. 2W = two-wheeler; 4W = four-wheeler; CO2 = carbon dioxide; EV = electric vehicle; g = gram; GNI pc = gross national income per capita; ICE = internal combustion engine; kWh = kilowatt-hour; km = kilometer; MJ = megajoule; NOx = nitrogen oxides; paxvkm = passenger vehicle-kilometer; PM10 = particulate matter less than 10 microns in diameter; SOx = sulfur oxides.

1. Data from IEA (2020), US Energy Information Administration international database, and World Bank.

2. Flex-fuel means that the cars run on ethanol and gasoline at the same time.

References

ANFAVEA (Associação Nacional dos Fabricantes de Veículos Automotores [Brazilian Automative Industry Association]). 2020. Anuário da Indústria Automobilística Brasileira [Brazilian Automotive Industry Yearbook] 2020. São Paulo: ANFAVEA.

Costa, Evaldo. 2020. “The Future of Electric Vehicles in Brazil.” Behavioural & Social Sciences, October 12, 2020. https://socialsciences.nature.com/posts/the-future-of-electric-vehicles-in-brazil

IEA (International Energy Agency). 2020. World Energy Balances: Energy Balances for 150 Countries and 35 Regional Aggregates. Online database. IEA, Paris. https://www.iea.org/data-and-statistics /data-product/world-energy-balances

IRENA (International Renewable Energy Agency). 2020. Global Renewables Outlook: Energy Transformation 2050. Masdar City: IRENA.

Marchán, Estefania, and Lisa Viscidi. 2015. “Green Transportation: The Outlook for Electric Vehicles in Latin America.” Energy Working Paper, October 2015, The Dialogue: Leadership for the Americas, Washington, DC.

UNEP (United Nations Environment Programme) and European Union. 2016. Movilidad Eléctrica: Oportunidades para Latinoamérica. Panama City: UNEP Regional Office for Latin America and the Caribbean.

Vehicle fleet composition: Mixed fleet

Net oil trading status: Importer

Relative cost of vehicles: High

The dominant vehicle type in Cambodia is two-wheelers (78 percent), followed by cars (15 percent) and buses (6 percent)(Global Green Growth Institute 2021). In 2018, electricity was primarily generated from renewable sources (60 percent) and less from fossil fuels (40 percent). Coal (36 percent) is the largest fossil fuel source for electricity generation, followed by oil (4 percent). Hydro (59 percent) and solar and biomass (together barely 1 percent) form part of the renewable sources of electricity generation, with most of the balance coming from coal (36 percent). The Cambodian government has stepped up to explore the increase in the adoption of low-carbon vehicles in the transportation eco-system. In 2019, the Global Green Growth Institute became a delivery partner of the National Council for Sustainable Development to deliver its Green Climate Fund for promoting green mobility through electric vehicles. The several pilot schemes launched in the country include the electric motorbike-sharing system called Go2, making electric vehicles more accessible to consumers (Niuseiy 2021). The country has introduced electric buses fitted with solar panels. The supporting charging infrastructure placed along the bus routes is also solar powered (de Carteret 2014). In 2021, the National Council for Sustainable Development prepared a strategy for promoting electric two-wheelers in the country (Global Green Growth Institute).1 In addition, the national energy policy sets important objectives for increasing renewable energy with greater reliance on private investment.

Despite facing relatively expensive vehicle costs, the case for electric mobility in Cambodia benefits from the dominance of two-wheel vehicles in the fleet, as well as the country’s status as an oil importer (figure A.2.1a). As a result, the overall case for electric mobility in the country is good (table A.2.1). There is a strong case for adoption of two-wheel electric motorbikes (figure A.2.1b), which present a life-cycle cost advantage of over 10 percent (almost 20 percent in financial terms). Nevertheless, the capital cost premium for electric two-wheel vehicles in Cambodia is particularly high at about 29 percent and represents as much as 6 percent of gross national income per capita, suggesting that provision of credit lines may be important to support adoption. At the same time, electric buses are beginning to offer modest economic advantages on the order of 3 percent of life-cycle cost. By contrast, the economics of electric four-wheel vehicles is quite marginal, and the associated capital cost premium prohibitive at 40 percent of gross national income per capita.

The externality benefits of electric mobility in Cambodia are relatively small (figure A.2.1c), perhaps because of the existing prevalence of hydro energy and limited urban air quality issues. An important exception is provided by two-wheel electric vehicles, which present much lower externalities than their conventional counterparts (figure A.2.1d). Otherwise, fuel cost savings are the main advantage associated with electric mobility in Cambodia.

The fiscal regime neither incentivizes nor disincentivizes the purchase of electric vehicles. However, fiscal policies do accentuate the fuel cost advantage of owning them, given that gasoline and diesel are taxed at 20–50 percent, whereas electricity is slightly subsidized. Consequently, the overall case for electric mobility in Cambodia looks better in financial than in economic terms (figure A.2.1a).

The total investment needs associated with the 30×30 scenario amount to US$44 million per year by 2030 (or 0.1 percent of Cambodian gross domestic product). About two-thirds of the required outlay is associated with the incremental capital cost of electric vehicles (figure A.2.2a). In terms of public investment, the most significant item is the provision of public charging infrastructure for private vehicles and buses (figure A.2.2a). Given that implicit carbon prices associated with electric two-wheelers and buses in Cambodia are negative (see table A.2.3), there is significant scope to cover 17–27 percent of public investment costs through carbon financing arrangements (figure A.2.2b.). However, for four-wheel electric vehicles, the implicit carbon price exceeds US$400 per ton.

The overall economic case for electric mobility in Cambodia is robust to more conservative assumptions about the cost of batteries (“scarce minerals” scenario) and the fuel efficiency of internal combustion engines (“fuel efficiency” scenario), and there is not much scope for further decarbonization of the power sector (“green grid” scenario) (table A.2.2). On a positive note, the emerging advantage associated with electrification of buses can be as much as tripled through the more efficient procurement and operation of vehicles (“efficient bus” scenario). However, the case for electrification of four-wheelers is only marginally improved in the case of taxi fleets and other intensively used vehicles (“taxi fleet” scenario). It’s clear that electric mobility in Cambodia needs to prioritize the two-wheel segment of the fleet, which offers so many strong advantages.

Figures and tables start on the next page.

Figures and Tables

b. Cost advantage: Vehicle type a. Cost advantage: Typology benchmarking

Note: Data in this figure represent the “business as usual” (BAU) scenario minus the 30×30 scenario (averages over fleet additions). The BAU scenario assumes that no policy target will be imposed for electric vehicles and that vehicle purchase decisions will continue to reflect historical trends. The 30×30 scenario assumes that sales of electric cars and buses will reach 30 percent, and of two- and three-wheelers, 70 percent, by 2030. 2W = two-wheeler; 4W = four-wheeler; CO2 = carbon dioxide; EV = electric vehicle; NOx = nitrogen oxides; PM10 = particulate matter less than 10 microns in diameter; SOx = sulfur oxides.

Note: Heading colors: blue = excluding taxes and subsidies, gray = fiscal wedge, green = including taxes and subsidies. 2W = two-wheeler; 4W = four-wheeler; “Local externalities” comprises local (NOx, PM10, SOx) air pollution costs. “Global externalities” comprises global (CO2) air pollution costs. CO2 = carbon dioxide; NOx = nitrogen oxides; PM10 = particulate matter less than 10 microns in diameter; SOx = sulfur oxides. Red and parentheses indicate negative value.

a. Breakdown of investment needs (US$44 million or 0.1% of GDP) b. Investment needs potentially covered by carbon financing

Private incremental vehicle cost 4Ws

Public charging infrastructure 3Ws and 4Ws

Public charging infrastructure e-bus

Public incremental vehicle cost e-bus

Private charging infrastructure

Private incremental vehicle cost 2Ws and 3Ws

Source: World Bank.

Note: Data in this figure represent the “business as usual” (BAU) scenario minus the 30×30 scenario (averages over fleet additions). The BAU scenario assumes that no policy target will be imposed for electric vehicles and that vehicle purchase decisions will continue to reflect historical trends. The 30×30 scenario assumes that sales of electric cars and buses will reach 30 percent, and of two- and three-wheelers, 70 percent, by 2030. 2W = two-wheeler; 3W = three-wheeler; 4W = four-wheeler; EV = electric vehicle; GDP = gross domestic product.

Source: World Bank.

Note: Data in this table represent the “business as usual” (BAU) scenario minus the named scenario (averages over fleet additions). The BAU scenario assumes that no policy target will be imposed for electric vehicles and that vehicle purchase decisions will continue to reflect historical trends. The 30×30 scenario assumes that sales of electric cars and buses will reach 30 percent, and of two- and three-wheelers, 70 percent, by 2030. The green grid scenario assumes that countries achieve certain region-specific targets for acceleration of renewable energy, as defined by the International Renewable Energy Agency (IRENA 2020). The scarce minerals scenario assumes that battery cost will decline by approximately 7 percent annually. The fuel efficiency scenario assumes that the rate of improvement of fuel efficiency for the internal combustion engine fleet will double from 15 percent to 30 percent. The efficient bus scenario assumes a capital cost reduction of 35 percent in the procurement of buses as well as optimized bus routes to increase the annual mileage of electric buses. The taxi fleet scenario assumes that the lifetime mileage of intensively used commercial vehicles will increase by four times in each country, that public investment in charging infrastructure will double the fast charger density for cars, and that the maintenance cost for cars will be doubled (assuming two lifetime battery replacements). Results have been normalized by new vehicles entering the market in 2030. The “fiscal wedge” comprises net taxes and subsidies. Red and parentheses indicate negative value. 2W = two-wheeler; 4W = four-wheeler; CO2 = carbon dioxide; EV = electric vehicle; NOx = nitrogen oxides; PM10 = particulate matter less than 10 microns in diameter; SOx = sulfur oxides; US$/Mpaxvkm = US dollars per million passenger vehicle-kilometers; n.a.= not applicable.

Overall investment needs (US$, millions)

—of which 4W purchase

—of which 2W purchase

—of which e-bus purchase

Fiscal

—of which vehicle duties

—of which vehicle taxes/subsidies

—of which gasoline taxes/subsidies

—of which diesel taxes/subsidies

—of

Implicit

—of which for

—of which for 2W

—of which for buses

Pollution

—of

—of

Source: World Bank.

Note: Red and parentheses indicates negative value. 2W = two-wheeler; 4W = four-wheeler; CO2 = carbon dioxide; EV = electric vehicle;

GNI pc = gross national income per capita; ICE = internal combustion engine; kWh = kilowatt-hour; km = kilometer; MJ = megajoule;

= nitrogen oxides; paxvkm = passenger vehicle-kilometer; PM10 = particulate matter less than 10 microns in diameter; SOx sulfur oxides.

1. Data from US Energy Information Administration international database and World Bank.

de Carteret, Daniel. 2014. “Solar Buses at the Temples of Angkor” Phnom Penh Post, September 6, 2014. http://www.phnompenhpost.com/post-weekend/solar-buses-temples-angkor Global Green Growth Institute. 2021. Promoting Green Mobility through Electric Motorbikes in Cambodia. Seoul, Korea: Global Green Growth Institute.

IRENA (International Renewable Energy Agency). 2020. Global Renewables Outlook: Energy Transformation 2050. Masdar City: IRENA.

Niuseiy, Sao Phal. 2021. “A Campaign to Promote the Use of Electric Vehicles Is Held This Month in Phnom Penh.” Cambodianess, February 7, 2021 https://cambodianess.com/article /a-campaign-to-promote-the-use-of-electric-vehicles-is-held-this-month-in-phnom-penh.