How Electric Vehicles Can Leapfrog To Emerging Markets

The shift of technologies from the cutting edge to the mundane defines technological revolutions. We are amid such a revolution. As Electric Vehicle (EV) technology matures, electric cars are becoming cheaper and their customer base in advanced post-industrial economies is. continuously expanding. That expansion is also happening internationally, with the Global South joining the race for cheap EVs. This market growth is not just the fulfillment of the technological potential of EVs, but a great environmental gain as well.

Technological advancements and environmental consciousness increased the incentives for producing and using electric passenger vehicles in the United States, China, and Europe. This is only tangentially relevant to the Global South where getting cheap transportation appears to be more important than expensive, environmentally-friendly EVs and plug-in hybrids.

As a recent World Bank report points out, the model for transitioning to electric mobility in the Global North cannot be applied to all countries. The Global North’s model, where EVs entered the market through a mix of state incentives, high-end consumer branding, and ideological enthusiasm is not transmissible.

For developing countries to adopt EVs and rapidly phase out reliance on internal combustion engine (ICE) cars, EVs must rapidly become cheap and ubiquitous in the Global South, and the charging infrastructure must be put in place to support it. The best hope for EVs is to technologically “leapfrog” in the same way that cell phones did in much of the emerging markets, wherein policy and market forces made cell phones more reliable and profitable than land lines .

Solvable obstacles remain to the development of EVs in the Global South. Dependence on cheap, demand-responsive public transportation systems is the norm in many developing nations. Non-motorized transport such as walking, riding donkeys and horses, cycling, and pedal-powered two and three wheelers also constitute a primary mode of commute for many. If not carefully considered, thoughtlessly introducing EVs may inadvertently price those who were previously able to afford transit out of the market, a sort of “transportation gentrification”.

EVs have a somewhat limited driving range compared to many gasoline vehicles, which can be limiting in areas with limited charging infrastructure. The disposal and recycling of EV batteries also raise concerns, as they contain toxic chemicals that can harm the environment if not properly disposed.

The environmental benefits of EVs depend on the source of electricity used to charge them. In developing countries with high dependence on fossil fuels for electricity generation, such benefits may be limited. Even so, the electric engine efficiency is higher than an ICE with many gains to be made for local air quality. Furthermore, different maintenance and repair needs than gasoline vehicles and a lack of trained mechanics in developing countries can make it difficult for EV owners to get their cars serviced until a new generation of electricians and mechanics is trained.

Usually, the best way to induce leapfrogging is with transformative policy, half measures are likely to fail as they did in Nepal, where a large EV program was initiated but was rejected when the promised public goods were outweighed by increases in transportation costs.

Several factors are critical to building the capabilities needed to ensure an equitable transition to electromobility. Access to uninterrupted electric supply is crucial, as the Global South often exhibits fluctuations in and poor dependability of electricity supply. Increased demand for electromobility can be an essential incentive to increase electricity production and expand reliable grid infrastructure.

Next, private, and public entities need to collaborate to develop new business models and appropriate tax policies that encourage and incentivize consumers to switch to EVs. This includes tax breaks, customs duty exemptions, innovative microfinance, outreach, and regulatory changes.

Despite shortcomings in available infrastructure and strong competition from conventional vehicles, the EV market is growing steadily in developing countries, driven by a range of factors including government incentives, environmental concerns, and improvements in technology.

In Africa’s Sahel region, the World Bank is currently working to advance electromobility by electrifying two-wheeled scooters and three-wheeled rickshaws. By tailoring EV expansion to each country’s needs and switching the most widely used forms of transportation to electric, electromobility is maximized and sustained long-term.

China, the world’s largest EV market, boasted sales of more than 5.67 million EVs and plug-ins in 2022 and is actively promoting EV adoption through subsidies, tax breaks, and regulations that encourage automakers to produce more EVs. This has helped domestic brands like BYD Co. and Geely Automobile Holdings to capture the booming market as Tesla’s sales slumped.

India is another hot potential market for electromobility adoption for EVs, with the government setting a target of 30% of all private vehicles EVs by 2030, with Tata Motors, Mahindra, and Ather Energy leading the charge. Various policy initiatives have been implemented to meet this goal, introducing reduced taxes and subsidies for EV buyers, supporting EV charging infrastructure development, and most recently, electrifying the bus rapid transit system. India’s example reflects many policy recommendations that can be implemented in electromobility rollout frameworks across the Global South.

The market sizes and relative costs for cheap electromobility are a testament to how the EV revolution is already unfolding in the Global South. India has an incredible 94.1% annual growth projection for EVs from now until 2030, where EVs are already priced lower than the West with the most popular brand, Tata Tiago Motors, averaging around 40% of the cost of its American competitors (~$25,000 USD vs $64,000 USD). Indonesia’s ambitious EV subsidization program stimulates an EV market where the most popular Nissan brands were selling for ~$14,000 with forthcoming government subsidies paying for approximately $5,000 USD of that cost, with smaller subsidies for electric motorbikes available. All over the Global South, not just in Indonesia, governments are betting big on EVs.

The next market and technological breakthroughs for EVs will not feature flashy tech exhibitions, cutting-edge features, or futuristic gadgets. They will be defined by the same consumer concerns that animate most people. Warranties, upfront costs, lifetime cost, reliability, and financing. The truly remarkable thing is that this will happen. EVs from the developing world are already reshaping and unlocking the economic potential of the Global South. U.S. and European EV manufacturers have their work cut out for them.