While EVs are possible “greener” alternatives to internal combustion engine-powered vehicles, stumbling blocks are still aplenty on the way to their wide-scale acceptance.
Affordability
Last year, nations across the globe pledged to pro-actively cut emissions to mitigate climate change.
However, transportation remains a major challenge, as it is the second largest contributor to carbon emissions globally.
To address this, EVs must enter the mainstream – and this is exactly what is happening.
Recent auto shows, such as the Tokyo Motor Show and the Detroit Auto Show have seen major automotive manufacturers further commit to develop EVs.
In the past few months alone, General Motors, Honda, Hyundai, Mercedes-Benz, Volvo, and local manufacturer Proton have all announced their intentions to commercially produce EVs in the next few years.
There is clearly a growing interest in EVs and we must take proactive steps to keep pace with this global trend.
In this article, we explore how pricing may hold the key to unlocking Malaysia’s EV potential.
As EV technology is still relatively nascent compared to that of internal combustion engine (ICE) vehicles, there still exist a disparity in pricing which could act as a deterrent to large scale adoption of EVs.
A large portion of the additional cost of EVs comes from the cost of manufacturing EV batteries which represents close to 50% of the manufacturing cost of an EV.
On this front, there has been significant progress with the cost of lithium-ion batteries dropping by 40% since 2010.
Prices now stand at around US$250 (RM1,000) per kWh and is set to drop to around US$100 (RM400) per kWh by 2020. (Based on IEA Global EV Outlook 2015).
As battery development improves, EVs will become more affordable in the long run. Nevertheless, looking at the immediate to short term, there are other measures that can help reduce the price gap.
Government role
Recognising the potential that a thriving EV market offers, several countries have implemented financial incentives to lower the price of EVs and encourage uptake.
For example, China offers subsidies of around 60,000 yuan (RM40,000) on the private purchase of EVs since 2010.
This has seen sales of EVs in China increase by over 300% annually and today it boasts the most EVs in the world with close to 450,000 EVs being deployed in government and corporate fleets, privately owned vehicles and public transport.
A similar subsidy is employed in Britain, through the Plug-in Car Grant which has offered a subsidy of around £5,000 (RM30,000) on EV purchases since 2010.
The subsidy has seen EV ownership increase by almost 300% from only 138 EVs in 2010 to over 41,000 EVs last year.
Local incentives
Here in Malaysia, during budget 2010 the Government introduced a 100% tax exemption on the purchase of hybrids.
This single initiative saw the annual sale of hybrid vehicles in Malaysia soar from just 138 units in 2010 to 13,506 units by 2013.
Looking to encourage greater domestic investment, a new policy favouring local assembly was introduced at the end of 2014.
As most models of hybrids were imported, the increase in price led to a 50% decline in hybrids sales.
This demonstrably shows the important role pricing plays in nurturing the growth of a new sector.
In order for Malaysia to capitalise on the burgeoning EV market, the Government must adopt a more long-term approach in catalysing the growth of the EV market.
Malaysian Green Technology Corp (GreenTech Malaysia), recognises the important role incentivisation can play in growing a new market.
The provision of 50% to 70% import and excise duty exemptions for all EVs and hybrids would immediately address the price barrier that many motorists face when it comes to purchasing an EV, increasing adoption rates and reducing the nation’s carbon footprint.
Knock-on effect
Spurring wide-scale adoption would require significant investment but as evidenced by China it will have a significant knock-on effect.
It would push manufacturers to expand their range of models and accessories while driving the growth of the charging infrastructure, battery and component manufacturers and customer service sectors.
This will ultimately benefit Malaysia environmentally, economically and socially.
The Prime Minister’s recent announcement that 100 units of the Tesla Model S will be imported duty-free for a leasing programme, was encouraging.
This is an important first step towards the realisation of such a policy, one which should be followed closely with an extension of this exemption to all low carbon emission vehicles.
The next article will see discussion centre on range anxiety - the final major challenge facing wide-scale adoption of EVs.
It will detail the root of the anxiety while considering the possible solutions that are already being rolled out both globally and here in Malaysia.
