economics of elecTric Vehicles for Passenger TransPorTaTion

a. Breakdown of investment needs (US$192 million or 0.18% 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.

—of

—of

—of

Fiscal

—of which

Other

—of which

—of which

—of

—of

Implicit

—of

—of

—of

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; 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 Ghana Revenue Authority.

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

CTCN (UN Climate Technology Centre & Network). 2020. “CTCN in Ghana: Developing a National Policy on E-mobility.” CTCN, Copenhagen, Denmark. https://www.ctc-n.org/news/ctcn -ghana-developing-national-policy-e-mobility.

Ghana Ministry of Transport. 2020. National Transport Policy. Revised August 2020 Accra: Ministry of Transport, Republic of Ghana. https://www.bcp.gov.gh/acc/registry/docs/NATIONAL%20 TRANSPORT%20POLICY.pdf

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

Kuhudzai, Remeredzai Joseph. 2020. “The Electricity Company of Ghana & POBAD International Partner to Install EV Chargin Stations in Ghana.” CleanTechnica, December 8, 2020. https:// cleantechnica.com/2020/12/08/the-electricity-company-of-ghana-pobad-international-partner-to -install-ev-charging-stations-in-ghana/.

Vehicle fleet composition: Mixed fleet

Net oil trading status: Importer

Relative cost of vehicles: Low

The dominant vehicle type in India is two-wheelers (73.0 percent),1 followed by cars (15.3 percent), three-wheelers (8.5 percent), and buses (3.2 percent) (India Ministry of Road Transport & Highways 2021, 2022). Electricity is primarily generated from fossil fuels (79.5 percent), with the balance of renewable energy coming mostly from hydro (8.6 percent).2 The electric vehicle industry is growing rapidly, supported by public incentives and financial and industrial policy schemes launched by both central and state governments. The most emblematic program is the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles program (in phase II) that includes explicit policies in support of automakers, innovative practices of procurement and demand aggregation, and the inception of risk mitigation instruments to attract commercial financing. The National Electric Mobility Mission Plan 2020, developed in 2013, addresses the issues of national energy security, vehicular pollution, and growth of domestic manufacturing capabilities (India Press Information Bureau 2015), and emphasizes the use of hybrid and electric vehicles (Drishtiias 2019). The government has plans to make a significant shift to electric vehicles by 2030 (Policy Horizons Canada, n.d.), prompting the Ministry of Power to issue guidelines and standards for charging infrastructure for electric vehicles in 2018 (India Ministry of Power 2019). Moreover, the National Energy Policy aims to increase the share of non-fossil-fuel–based capacity in the electricity mix to more than 40 percent by 2030 (NITI Aayog 2017).

India presents many of the country characteristics most favorable to the adoption of electric mobility, including relatively low vehicle costs, a highly diversified fleet, and oil-importing status (figure A.6.1a). In addition, the vast scale of the Indian market helps to drive down costs and makes possible domestic production. As a result, the overall case for electric mobility is good (table A.6.1). There is a particularly strong case for adoption of two-wheel electric motorbikes (figure A.6.1b), which present a life-cycle cost advantage of over 20 percent (over 40 percent in financial terms). The case for electrification of buses is also moderately supported, whereas electric four-wheelers are not yet economically attractive (figure A.6.1b). Nevertheless, the capital cost premium for electric two-wheel vehicles in India is about 5 percent and represents as much as 1.2 percent of gross national income per capita, suggesting that provision of credit lines may be important to support adoption.

The externality benefits of electric mobility in India are relatively small (figure A.6.1c), despite the existing prevalence of coal-fired power and serious urban air quality issues. Nevertheless, both electric two-wheelers and buses are able to reduce externalities by about 20 percent, and buses have a particularly large effect on local externalities (figure A.6.1d). Otherwise, fuel cost savings are the main advantage associated with electric mobility in India. Not only does the fiscal regime incentivize the purchase of electric vehicles with a tax differential of minus

32 percent, but it also accentuates the fuel cost savings of electric vehicles, given that gasoline and diesel are heavily taxed by 40–100 percent even as electricity is subsidized by about 40 percent (table A.6.3). Consequently, the overall case for electric mobility in India looks better in financial than in economic terms (figure A.6.1a).

The total investment needs associated with the 30×30 scenario amount to US$22.4 billion per year by 2030 (or 0.44 percent of Indian gross domestic product). Over two-thirds of the required outlay is associated with the incremental capital cost of two-wheel and four-wheel electric vehicles borne by the private sector (figure A.6.2a). In terms of public investment, the most significant item is the provision of charging infrastructure for both buses and private vehicles (figure A.6.2a). Given that implicit carbon prices associated with electric two-wheelers in India are negative (table A.6.3), there is significant scope to cover 26 percent of the incremental capital costs through carbon financing arrangements (figure A.6.2b). Although implicit carbon prices for buses are similarly negative, the potential for carbon financing is quite small relative to incremental capital costs. By contrast, for four-wheel electric vehicles, the implicit carbon price is approaching an exorbitant US$700 per ton.

The overall economic case for electric mobility in India 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 improves somewhat under further decarbonization of the power sector (“green grid” scenario) (table A.6.2). 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, the case for electrification of four-wheelers remains unfavorable even for taxi fleets and other intensively used vehicles (“taxi fleet” scenario). It is clear that electric mobility in India needs to prioritize the massive two-wheel segment of the fleet, which offers so many strong advantages, while working toward further improving the case for electrification of buses.

Figures and tables start on the next page.

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

Local externalities (NOx, SOx, PM10)

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.

(b) (c) (d) = (a + b + c) (e) (f) = (d + e) (g) (h) = (d + g)

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$22,403 million or 0.44% 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 impact (US$, millions)

—of which vehicle duties

—of which vehicle taxes/subsidies

Other parameters Parameter Value Net tax difference on EV 4W (%)

Net tax difference on EV 2W (%)

Net tax difference on e-bus (%)

Price of gasoline (US$/liter)

Net gasoline tax (US$/liter)

Price of diesel (US$/liter)

Net diesel tax (US$/liter)

Price of electricity (US$/kWh)

Source: World Bank.

—of which gasoline taxes/subsidies

—of which diesel taxes/subsidies

—of which electricity taxes/subsidies

Implicit carbon price (US$/ton)

—of which for 4W

—of which for 2W

—of which for buses

Pollution reduction (tons)

—of which local (SOx, NOx, PM10)

—of which global (CO2)

Affordability of EV 2W (Δ cost % GNI pc)

Affordability of EV 4W (Δ cost % GNI

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.

Notes

1. Two-wheelers cover all motorized two-wheel vehicles registered.

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

References

Drishtiias. 2019. “National Electric Mobility Mission: 2020.” Drishtiias, July 10, 2019. https://www .drishtiias.com/daily-updates/daily-news-analysis/national-– electric-mobility-mission-2020.

India Ministry of Power. 2019. “Charging Infrastructure for Electric Vehicles—Revised Guidelines Standards.” Ministry of Power, Government of India, New Delhi.

India Ministry of Road Transport & Highways. 2021. Road Transport Year Book (2017–18 & 2018–19). New Delhi: Transport Research Wing, Ministry of Road Transport & Highways, Government of India.

India Ministry of Road Transport & Highways. 2022. VAHAN 4.0 Dashboard. Ministry of Road Transport & Highways, Government of India, New Delhi. https://vahan.parivahan.gov.in/vahanservice/vahan /ui/statevalidation/homepage.xhtml.

India Press Information Bureau. 2015. “India Prime Minister Today Unveiled the National Electric Mobility Mission Plan (NEMMP) 2020.” Press release, Press Information Bureau, Government of India.

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

NITI (National Institution for Transforming India) Aayog. 2017. “Draft National Energy Policy.” NITI Aayog, Government of India, New Delhi.

Policy Horizons Canada. n.d. “India Is Planning to Reach 100% Electric Vehicles by 2030.” Internet Wayback Machine. https://web.archive.org/web/20160916145621/http://www.horizons.gc.ca/eng /content/india-planning-reach-100-electric-vehicles-2030.