How large a part will electric vehicles play in solving our climate woes?

Singapore

THE growth of the battery electric-vehicle (EV) market has sped up considerably in recent years, as more and more come to view these cleaner-energy vehicles as being integral to the world's development of an environmentally sustainable future.

But, have the benefits of EVs been overstated - just how much of a difference will they make in global efforts to cut harmful emissions and mitigate climate change? And what obstacles lie in the way of their adoption, which could affect the impact they will have?

For a start, however one feels about it, the accelerating transition from a more traditional to a cleaner energy-vehicle market is happening.

Jennifer Boscardin-Ching, client portfolio manager of the Thematic Equities Team at Pictet Asset Management, points to the "flurry of activity" among traditional auto-makers rushing to join the EV ecosystem.

"Volkswagen now has ambitions to become the global leader in EVs by 2025 - aiming for EVs to exceed 70 per cent of European and 50 per cent of Chinese and US sales by 2030; BMW also announced a targeted steep rise in EV sales by the end of the decade."

She notes that these announcements are in line with similar commitments from the likes of General Motors, Ford, Volvo, and Nissan - which recently unveiled an US$18 billion EV strategy.

"With continuing cost reductions, supportive regulatory frameworks, and now firm commitments from some of the world's largest car companies, the secular growth drivers for e-mobility are firmly in place with an accelerated transition underway," Boscardin-Ching adds.

But that's not to say that the transition will not encounter speed bumps along the way; there is also the question of whether it will have a meaningful impact on emissions reductions and climate change mitigation.

Potential for change

Saurav Kumar, CEO of EV startup, Euler Motors, says: "Alarming pollution levels, global climate change and dependence on fossil fuels are the prime reasons for adopting EVs. Using more energy efficient vehicles like EVs is an important part of continuing this successful trend of minimising imported petroleum and, therefore, adding to the nation's energy security."

He adds that EVs produce no tailpipe emissions and have a far lower overall operating cost than internal combustion engines (ICEs); in commercial segments, in particular, EVs operate at one-sixth of the total costs due to high efficiency of the electric drive components.

Kaushik Sriram, partner at global management consulting firm Kearney, points out, however, that EVs do rely on complex ores for production, and that electricity for charging is often supplied through fossil fuels.

Still, with recent studies showing a growing positive differential for EVs, predominantly driven by greater battery efficiency, Sriram believes that, on balance, the rise of EVs - in conjunction with renewable energy generation and EV battery innovation - will end up collectively driving a positive impact on climate change.

Christopher Wong, client portfolio strategist, South-east Asia, at investment management firm Fidelity International, says some studies have found that emissions can be up to 70 per cent lower in EVs than in ICE vehicles. Coupled with the fact that transportation accounts for over a fifth of the world's carbon emissions - the majority coming from road vehicles - Wong believes the transition from ICE vehicles to EVs would aid in mitigating climate change.

Andrey Berdichevskiy, Deloitte Future of Mobility Solution Center leader, also points out that EVs have other environmental advantages beyond mitigating climate change, such as by reducing local pollutants. "Local air pollution causes an estimated 7 million deaths worldwide every year, and (EVs can) also reduce the noise pollution from transport."

Wong stresses, however, that while the long-term benefits of EVs may be more obvious, their near-term benefits may be slightly less clear, given that transition is a multi-period process.

"For example, the reduction in emission of up to 70 per cent in EVs currently applies to cases in certain countries, where the majority of electricity already comes from renewables. This reduction is currently less in countries which still rely on more traditional sources of energy. The reduction is lower in countries which still generate electricity from more traditional fossil fuel-based sources," he says.

Berdichevskiy is of the same view; but he also points out that - according to a July study by the International Council for Clean Transportation (ICCT) - the emissions over the lifetime of an average medium-sized EV registered today are already lower than comparable gasoline cars: by 66 to 69 per cent in Europe, 60 to 68 per cent in the US, 37 to 45 per cent in China, and 19 to 34 per cent in India.

In Singapore's case, Wong says, switching from ICE vehicles to EVs may result in net carbon savings of about 50 per cent, according to estimates from the Land Transport Authority. If all light vehicles ran on electricity, the net carbon reduction could potentially come up to about 4 per cent of Singapore's annual emissions.

"However, as Singapore still generates most electricity from natural gas, a fossil fuel which still emits carbon when burnt, the early benefits might be to a lesser degree until we further increase our use of renewable resources," he adds.

Alicia Garcia Herrero, chief economist for Asia-Pacific at corporate and investment bank Natixis, says it is also important to understand that EVs are just a "part of the puzzle" in climate-change mitigation.

"Emissions from the industrial sector are at least double (the emissions from passenger transportation), if not four times in a country like China. The reason EVs have become so central to the solution of climate change is that the technology is well advanced in terms of its commercialisation, while this is not the case for many other sources of emissions."

Obstacles to adoption

Despite their recognised benefits, however, obstacles to the widespread acceptance and adoption of EVs remain, which could affect their impact; in the Asia-Pacific, incentivising policies and adoption rates vary significantly.

In Singapore, the government has set targets for cleaner energy-vehicle adoption in the country's Green Plan 2030. It states that new registrations of diesel cars and taxis will have to cease from 2025, while all new car and taxi registrations have to be those of cleaner-energy models from 2030.

It is also aiming to have 60,000 charging points nationwide by 2030, including 40,000 in public carparks and 20,000 in private premises.

"Singapore is clearly ahead of the curve in terms of thinking about EV accessibility, with multiple pilots in public transportation and increasing EV share in private vehicles," Sriram says.

Still, he adds, the pace of the addition of charging infrastructure remains a challenge in the region, particularly in dense urban clusters, with battery-swapping emerging as an alternative option.

Wong is of the view that "quite a bit of work" remains to be done, in order for Singapore to reach its targets - the largest task being building-out charging infrastructure.

"In the more immediate term, surface-level infrastructure like substations and transformers need to be upgraded, while more charging stations will be required, especially in public places like HDB estates, to drive adoption. Over the slightly longer term, more also needs to be done like adding more transmission cables to supplement existing infrastructure."

Wong adds that a lack of charging points in neighbouring Malaysia may also deter frequent cross-border drivers.

Berdichevskiy agrees, and adds that Singapore, in particular, needs to address the issue of high land and property costs here to incentivise installation by private-sector operators.

He believes addressing usage incentives, such as the use of special lanes - or a dedicated ERP tariff, in the case of Singapore - along with dedicated parking spaces in city centres, and periodic tax advantages would help to further accelerate EV adoption in the region.

"A crucial step for the adoption of EVs (in Singapore) by both private and commercial customers will be a revision of the EV road tax bands to make EV road tax more comparable to ICE vehicles," he added.

Another potential obstacle, which Berdichevskiy says is also an often-overlooked area, is the lack of data standardisation when it comes to charging - this includes the location, occupation and reservation status of the charging pillars, as well as protocols for communication, in the areas of billing and payment, for example.

Herrero believes that governments across Asia would need to support the change through their policies, such as fiscal incentives and the like, both on the demand and supply sides, given that EVs are generally more expensive than ICE vehicles.

"This is clearly the case in the European Union (EU), which has seen a rapid increase in the demand for EVs, thanks to such policies. Beyond fiscal incentives, it is also very important to guarantee enough charging stations so that EVs can be used - Norway is a very good example of government policies supporting the widespread location of charging stations."

She said that supply-side incentives are also important, so as not to create a heavy dependence on imports of the parts and components of an EV. "This is particularly the case when it comes to software, as the production of at least part of such crucial components can create a new relevant data-driven sector in Singapore."

Kumar recognises that consumers in Asia and across the globe might be reluctant to make the switch because of their preference for not just the cost, but also the performance of conventional ICE vehicles. "These areas can be navigated by bringing powerful vehicles that match or even surpass ICEs in terms of performance ... (along with) no compromises on load capacities and maximum range, and superior batteries," he said.

The road ahead

And so, observers believe greater investment is needed in several areas to bring about an effective transition.

Herrero says: "Many aspects need more investment, especially larger - and thus, high emissions - forms of transportation, especially in air and shipping. On this front, hydrogen is bound to be the solution but more technological progress is needed as well as full commercialisation."

Berdichevskiy has his eye on the development of new high energy density battery technologies, which would address consumers' range anxiety, and charging times, as well as efforts to address the scarcity of certain raw materials for battery manufacturing.

In addition, he said, "we can expect investments in increasing production capacity for battery cell manufacturing and localising battery assembly and integration".

"As the demand for and the installation of charging infrastructure increase, we will see growth in services innovation, with a growing sector for the maintenance, upgrade and repairs of charging infrastructure. From the technological standpoint, the investment will evolve into utilising machine learning and advanced analytics for predictive purposes but also for the optimisation of charging installation to increase the return on investment from this capital-intensive business."

Wong says he expects investments from governments to centre on building-out infrastructure "to make it convenient and price efficient to drive an EV as it is for an ICE vehicle ... while public transportation providers can also gradually be encouraged to transit towards increasing the number of EVs within their fleets".

Sriram, who believes Asian countries are at an inflection point of rapid EV growth, also sees a significant opportunity for public transport to move to EVs and hybrids, given the ease of setting up charging infrastructure for fleets and enterprise fleets, and believes technology investment will be focused on fast-charging technology, battery material innovation, and EV-focused mobility-as-a-service platforms.