Asia’s Drive for Electric Vehicle

China's electric cars | OPED COLUMN POLITICS

[ by Kaoru Natsuda ]

The global automotive industry is at a crossroads as electric vehicles (EVs) become increasingly important for a new generation of environmental technologies. The European Union is a driver of the move away from internal combustion vehicles (ICVs) — gasoline and diesel engine vehicles — with a range of policies that Asia may now look to emulate.

In 2020, EU regulations set a standard of 95 grams of CO2 emissions per kilometre travelled on average. If emissions exceed this standard, vehicle producers must pay a €95 (US$115) fine for every excess gram of CO2, multiplied by the number of vehicles sold. These regulations come ahead of the anticipated prohibition of ICV sales in Germany, the United Kingdom and Sweden in 2030, and France and Spain in 2040. This is also influencing a potential ban of ICVs in Japan, China, Canada and California in 2035.

There are three types of EV technologies — hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs). HEVs have been available on the market since the late 1990s, followed by mass production of PHEVs and BEVs from the 2000s. Some jurisdictions such as United Kingdom, Norway and California will ban both HEVs and PHEVs in the future to reduce air pollution.

joint research project between Mazda and Kogakuin University assessed CO2 emissions of ICVs and a BEV in Japan, China, Australia, Europe and the United States. They found that in Australia, BEVs do not produce fewer CO2 emissions than ICVs due to the country’s heavy dependence on fossil fuels for electricity. In Japan, China, Europe and the United States some ICVs generated fewer CO2 emissions than the BEV in certain conditions. This study revealed that generating electricity is the most critical factor for EV policy, and that the production of BEVs may generate more CO2 emissions than ICVs.

The role of subsidies is a critical tool for maintaining EV policy due to higher vehicle costs in most countries. In Japan, the Suga administration is arranging 8 billion yen (US$77.1 million) of EV subsidies in January 2021 that can be used for a maximum of 800,000 yen (US$7710) per vehicle, covering 10,000 BEVs. Local governments also provide an EV subsidy, including 300,000 yen (US$2891) in Tokyo, meaning that BEVs can be subsidised by over US$10,000.

The United States provides a maximum of US$7500 federal and US$1500–5000 state subsidies per vehicle. But government expenditures in many countries are rapidly increasing in the fight against the COVID-19 pandemic, so increasing (or even maintaining) such subsidies in the future is uncertain.

BEVs require far fewer components than ICVs, meaning a shift to BEVs will involve a considerable restructuring of existing automotive supply chain networks. Germany expects the transition to BEVs to cost over 410,000 jobs in the automotive industry in the worst-case scenario.

Looking at Asia, Japan announced it could ban new sales of ICVs in the mid-2030s in order to achieve net carbon neutrality by 2050. In response, the president of Toyota and the Japan Automobile Manufacturers Association, Akio Toyoda, stressed that there was room for improvement in the environmental impact and technology of ICVs.

In China, the world’s largest vehicle producing country, the phasing out of ICV sales in 2035 was announced in October 2020. Unlike Japan and South Korea, where traditional vehicle producers dominate electric mobility, a number of new venture firms like NIO are emerging in the electric vehicle market and competing against traditional automotive producers.

In Southeast Asia, the Thai government introduced an EV action plan in 2016 encouraging the production of BEVs and PHEVs, with a target of 1.2 million such vehicles in use by 2036. In response to this, preferential tax treatment for EVs was granted to 13 firms. In March 2020, Thailand introduced an EV roadmap with the aim of producing 250,000 EVs and developing an ASEAN EV hub by 2025.

The Indonesian government promotes low emissions electric mobility technology under its Low Carbon Emission scheme. In August 2019, President Joko Widodo signed a regulation on the promotion of battery-powered road vehicles. Competing with Thailand, Indonesia aims to establish an EV hub in the region by providing tax incentives with local content rules, which may include HEVs and PHEVs. In response, Toyota announced the production of HEVs and the development of PHEVs and BEVs in Indonesia in March 2020.

Historically, BEVs have three problems — lower range, higher price and little supporting infrastructure. Technological progress in battery and charging technology can address the first point. For the other two problems, the government will be increasingly important as a provider of infrastructure and subsidies.

Developing charging infrastructure in homes and in public places is a precondition for PHEVs and BEVs. It is also important to stress that a country’s energy policy is highly significant for electric mobility. To maximise the environmental benefits of PHEVs and BEVs, renewable energy must be a country’s main energy source.

Kaoru Natsuda is Professor at the College of International Management, Ritsumeikan Asia Pacific University.

Originally published on East Asia Forum.

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