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Economic viability of electric vehicles is strong and improving in developing countries: WB

November 11, 2022
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A new research from the World Bank finds feasible entry points to an electric mobility transition in developing countries.

Electric buses, which cover long mileage and high occupancy, and electric two- and three-wheeled vehicles, which provide last-mile connectivity, are emerging as cost-effective starting points that also bring development benefits.

Electrification of transport is one of the most talked about instruments to set the world on a net-zero carbon trajectory. For the low-emitting developing countries, transitioning from conventional vehicles to electric vehicles (EVs) brings additional benefits: improved local air quality, last-mile connectivity in remote places, and reduced dependency on imported fuel.

Despite these advantages, they remain a relative rarity in developing countries, and most of the world’s 6.6 million EV sales in 2021 were concentrated in major global markets such as China, Europe and the United States. Electric vehicles come at a cost premium, sometimes more than 70% compared to conventional vehicles, creating a financial hurdle for many consumers in developing countries.

But the World Bank’s new report, The Economics of Electric Vehicles for Passenger Transportation, found that in many markets, the savings in fuel and maintenance costs accrued over the life of an EV more than offsets the relatively high purchase price. Further, when health and environmental benefits were factored in and monetized, the economic case for e-mobility was already strong in about half the countries studied. The viability of electric vehicles is expected to further improve between now and 2030 as prices may continue to drop and charging infrastructure may become more ubiquitous.

“We already knew that an e-mobility transition was important; with this research, now we know that it is feasible,” said Riccardo Puliti, Vice President of Infrastructure at the World Bank. “Our report makes it clear that all countries need a plan for incorporating electric vehicles into their strategies for sustainable mobility.”

In addition to making the economic case for e-mobility, the report highlights several actions governments and financial institutions can take to accelerate the transition to electric vehicles. Investing in electric vehicle charging infrastructure can be up to six times more effective at encouraging EV purchases than subsidies.

Additional priorities should be advancing innovative models for leasing and recycling batteries, which can reduce the cost of vehicles, and bringing additional commercial financing to the market. Governments will also need to examine the fiscal implications of an e-mobility transition, especially if fuel taxes comprise a large share of tax revenue, or if the fiscal sustainability of power utilities is precarious.

The World Bank is already working with many client countries, including Senegal, India, Egypt and Brazil, Chile, Colombia, Rwanda, the Philippines on projects to advance electric mobility.

Many of these projects aim to incorporate electric buses into the public transportation systems of large cities. Others make electric two- and three-wheelers an affordable, clean alternative to motorisation.

“Mobility is a fundamental lifeline that connects people to jobs, education, critical services and opportunities. But each year 7.8 million years of life are lost due to health complications arising from air pollution. There is an urgent need to lower emissions from transport, and all transport decarbonisation tools – including e-mobility - are on the table,” says Cecilia M. Briceno-Garmendia, Lead Economist for the Transport Global Practice at the World Bank and lead author of the report. “For developing countries, the e-mobility transition is no longer a question of ‘if’ but ‘how’ and ‘when.’”

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