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Japan's EV Hesitation The High Cost of Delay to Its Automotive Sector by EOS Intelligence
by EOS Intelligence EOS Intelligence No Comments

Japan’s EV Hesitation: The High Cost of Delay to Its Automotive Sector

Japan is the world’s fourth largest automotive manufacturer, behind China, the USA, and India. The country has been long known for its innovation, technology, and efficiency in car manufacturing. Despite being one of the automotive superpowers, Japan has been slowly losing its dominance, struggling to maintain its competitive edge on the global stage. Rising consumer demand for electric vehicles (EVs) and Japan’s slower rate of adopting EV technology have largely contributed to this downfall. In 2022, Japanese brands accounted for less than 5% of global EV sales.

A 2022 report by the Climate Group, an international non-profit organization, warns that if Japan fails to adapt swiftly to global EV trends, the country could witness a 50% reduction in auto exports, impacting over 14% of its GDP by 2040.

Japan prioritizes hybrids and plug-in hybrids over electric vehicles

Japanese automakers are the pioneers of the EV development. Toyota launched Prius, the first mass-produced hybrid vehicle, in 1997, marking a significant development in the global automotive industry. Following Prius, Nissan launched Leaf in 2010, which gained significant attention worldwide as the first mass-produced battery electric vehicle.

Despite being the first to the EV revolution, Japan has failed to make a strong footprint in the global EV race so far. Japanese automakers have been largely skeptical about the EV’s future, profitability, and proposed environmental benefits. This has led them to tread cautiously. Instead, the Japanese government views hybrids (HEVs) and plug-in hybrids (PHEVs) as a strategic priority. It claims these vehicles meet both emissions targets and offer customers electrification features.

However, other major markets, such as the USA, China, the EU, and the UK, are trying to curtail HEVs and internal combustion engine vehicles (ICEVs) sales within the next 10-15 years. For instance, in 2021, the EU Commission announced a ban on ICEVs, including HEVs and PHEVs, starting in 2035. Similarly, the UK government proposed to ban all ICEVs beginning in 2035.

While Japan decided to ban gasoline vehicles by 2030, much of its focus is on promoting HEVs. Japan currently dominates the global gasoline-electric hybrids (HEVs) market and hopes to leverage its massive investment in the technology. Consequently, the country has delayed a significant push for EV adoption. Japan’s strong emphasis on hybrid technology has made other countries, especially China, gain a massive lead in developing and commercializing battery electric vehicles (BEVs).

With the looming bans on ICEVs and the increased consumer preference for BEVs over gasoline-powered engines, the limited number of Japanese BEVs on the market has led to a subsequent loss of market share for Japanese automakers.

Japan's EV Hesitation The High Cost of Delay to Its Automotive Sector by EOS Intelligence

Japan’s EV Hesitation The High Cost of Delay to Its Automotive Sector by EOS Intelligence

Traditional auto manufacturing environment makes the EV switch difficult

Japan’s economy is intertwined with its auto industry. Automotive manufacturing accounts for about 2.9% of the country’s GDP and 14% of the manufacturing GDP. The country spent years working on perfecting the ICEV automotive technologies and manufacturing. Japan wishes to retain its advantage from ICEVs for as long as possible. The current prevalence of traditional manufacturing capabilities and well-established supply chains make the country hesitant to switch to EVs.

ICEVs and EVs cannot be manufactured on the same platform. Remodeling existing ICEV facilities into EV facilities is a daunting and cost-intensive task. Moreover, as EVs require fewer parts, Japanese automakers are concerned about the impact on their extensive networks of components and parts suppliers, which could disrupt the entire industry.

Further, the significant costs associated with developing EV production technologies and platforms have led these automakers to question the potential profitability of EVs. Japan’s complacency with ICEVs has resulted in its lagging position in the global EV race.

Japan’s focus on fuel cell vehicles hampers EV development

Japan is a country with the least self-sufficient energy system. The country imports over 90% of its energy, heavily relying on foreign sources. Energy independence has been Japan’s major strategic goal for many years now. The government views hydrogen as a crucial clean energy source since the country can produce it domestically. On the contrary, EVs use electricity and could further increase the country’s energy dependence.

The government invested about US$3 billion between 2012 and 2021 in hydrogen technology. Some 70% of that was dedicated to fuel cell vehicles (FCEVs) and related infrastructure. The country aims to sell 800,000 FCEVs by the end of 2030 and provides massive subsidies and funds to Japanese automakers to research, develop, and commercialize FCEVs.

Thanks to substantial government support, in 2014, Toyota launched Mirai, the first mass-produced fuel cell vehicle. However, high fuel costs and insufficient hydrogen infrastructure have slowed its adoption in the country. As of January 2023, Japan had only built 164 hydrogen stations nationwide, far behind the target of 1,000 stations by 2030.

FCEVs demand and sales have not picked up the pace owing to the limited number of fueling stations and FCEVs’ high running costs. Automakers sold only 8,283 fuel cell vehicles by the end of July 2023. This was far below the sales that could lead to the 800,000-vehicle target set for 2030. Japan’s heavy focus on hydrogen technologies contributes to the slow EV transition, impacting its competitiveness in the global automotive space.

Increased EV competition puts Japan in a tight spot

Due to the surging interest in EVs, automakers from China, South Korea, Germany, and the USA have disrupted Japan’s dominance in the automotive sector over the past few years. This shift is especially evident in emerging markets such as Southeast Asia, with a surging demand for EVs. International automakers, especially the Chinese, have slowly expanded their presence in this region.

For instance, several Chinese automakers have entered Indonesia over recent years, challenging Japan’s long-standing dominance of the Indonesian automotive market. Wuling, a prominent Chinese EV automaker, has gained significant popularity in Indonesia, making it the seventh preferred car brand. In May 2024, BYD, another Chinese automaker, announced its plans to build a US$1 billion EV production facility in West Java, Indonesia. To be completed in 2026, this facility would significantly improve the Chinese market presence in Indonesia, which might further weaken the Japanese market share. Meanwhile, South Korean automakers Hyundai and Kia are also making significant strides in the Indonesian market.

Japanese automakers have also been losing their grip in Thailand as EVs are gaining traction. In 2023, new vehicle sales of Mazda, Mitsubishi, Nissan, Suzuki, and Isuzu fell by 25% in the country, while the market share of Chinese brands increased to 11% from 5% the previous year. As a response to these shifting dynamics, Japanese automakers either choose to close or merge factory operations in Thailand. In June 2024, Suzuki Motor decided to stop making cars in Thailand altogether. China’s BYD and Great Wall Motor are spending US$1.4 billion on new EV production and assembly facilities in Thailand to facilitate domestic production and overseas sales.

Sales of Japanese brands have also plunged in China in recent years. Amid low sales and intense EV competition, in October 2023, Japanese automaker Mitsubishi Motors announced its exit from a joint venture with the Guangzhou Automobile Group, a China-based automotive manufacturer. They shut down all the local manufacturing operations.

With the rising preference for EVs, Japanese automakers will likely face more fierce competition, which could profoundly transform their position in the global automotive landscape.

Toyota and Honda look to strengthen overseas EV manufacturing capabilities

Amidst increasing competition, Japanese automakers have recently started investing in EV technologies and production to catch up with rivals such as China, Europe, and the USA. Large carmakers, such as Honda and Toyota, are looking to develop and commercialize solid-state batteries to enhance the competitiveness of their EV line-up in the global EV market. These batteries are relatively safer than lithium-ion batteries, offering greater energy density and quick charging times. For instance, Toyota claims its first-generation solid-state batteries would cover a range of about 520 miles (about 830 km), with a 10-minute charging capability.

Toyota and Honda want to strengthen their EV supply chain, especially in North America. Toyota plans to launch a three-row electric SUV in the USA in 2025, now postponed to 2026. This SUV will be the company’s first electric car assembled locally. Toyota invested US$8 billion in its Princeton, Indiana facility to support production and added a new battery pack assembly line. The company has also invested considerably in preparing its facility in Kentucky for another three-seater electric SUV manufacturing.

In the European market, Toyota is looking to release six electric models by 2026 amidst the increasing demand. As its sales are shrinking in China, Toyota plans to launch an EV with autonomous driving technology in 2025. In Thailand, Toyota is set to launch an electric pickup truck in 2024.

In January 2024, Honda announced an investment of US$14 billion to build an electric car and battery plant in Ontario, Canada. The carmaker also announced an investment of US$700 million to start EV production in Ohio, USA. Honda said it would invest nearly US$65 billion in EVs till 2030. It plans to sell two million BEVs by 2030 and aims to make 40% of the vehicle sales either EV or FCEV by the same year.

Nissan, another giant Japanese carmaker, plans to achieve 40% of global offerings as EVs by 2026. However, Nissan’s EV strategy is largely unclear compared to Toyota and Honda. As Nissan struggles to counter the EV dominance, the company has increasingly leveraged partnerships with carmakers such as Mitsubishi and Renault to bolster its EV supply chain and production. In March 2024, Nissan and Honda did a joint feasibility study on vehicle electrification. Together, the companies look to develop automotive software platforms, core components related to EVs, and other electrification components.

Suzuki Motor has also announced its plans to invest approximately US$35 billion by 2030 in BEVs. The company plans to introduce BEVs in Europe, Japan, and India over the next few years.

Some smaller automakers, such as Subaru, Mazda, and Mitsubishi Motors, are still unclear about their EV transition and face daunting challenges in rolling out EVs.

EOS Perspective

Japanese automakers are realizing their difficult position and plan to bolster their EV manufacturing and technological capabilities. However, it requires significant efforts, and the road to EV transition will not be easy.

One of the critical factors affecting Japan’s EV adoption is the supply chain constraints. Japan does not possess the minerals necessary to make batteries for EVs. The country primarily depends on its rival, China, for approximately 60% of its rare earth requirements. Globally, China refines 90% of critical minerals, including 60% to 70% of lithium and cobalt, needed to make EV batteries. The Japanese government is looking to diversify its EV manufacturing supplies to reduce its reliance on China. The country has taken significant strides to develop critical mineral resources with other countries such as the USA, Indonesia, and Australia. Inevitably, all these efforts would take a lot of time and money.

Japanese automakers are also less proficient in vehicle software development, an aspect that EVs require to a great extent. To address this challenge, leading Japanese automakers have partnered with other automotive companies to develop software for EVs. In August 2024, Honda, Mitsubishi Motors, and Nissan announced a collaboration to develop software-defined vehicles (SDV), to standardize battery technology, and to reduce EV production costs.

Mass-producing EVs at a competitive price is one of the other significant challenges for Japanese automakers. Currently, China-based BYD and CATL supply 50% of the batteries for EVs globally. These companies spent years perfecting the cost-effective battery technology using lithium iron phosphate (LFP) cathodes. They have strong expertise in efficiently transferring innovations from R&D into large-scale production.

However, unlike China, Japan still depends on lithium-ion batteries using NMC cathodes, which involve lithium, nickel, manganese, and cobalt. These batteries are cost-intensive in comparison to China’s LFP batteries. BYD and CATL produce batteries at lower capital costs (below US$60 million per gigawatt hour). In comparison, Japan’s Panasonic produces batteries at US$103 million per gigawatt hour. It would take years for Japan to perfect the battery technology and mass-produce EVs at affordable prices.

Japan has also not yet established comprehensive policies and strategies to push EV adoption. Stringent regulations have hampered the expansion of EV charging infrastructure in the country. On the other hand, since the 2010s, countries such as the USA, China, and Norway have started implementing measures such as EV purchase subsidies, tax rebates, and procurement contracts to promote EV sales. China invested over US$29 billion between 2009 and 2022 in promoting EVs. If Japan does not take similar measures soon, its ability to foster an EV-friendly environment will be significantly compromised.

by EOS Intelligence EOS Intelligence No Comments

India Union Budget 2017: Implications for the Auto Industry

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Due to various macroeconomic factors, the Indian automotive industry has not achieved its full growth potential during the last 12-18 months.

In addition, the government’s recent demonetization policy has impacted consumer spending and created an unfavorable environment for the auto industry on the whole.

Amid these challenges, key stakeholders within the auto industry were hoping for a favorable budget which could revive consumer demand and catalyze growth in the industry.


What was expected

The auto industry had a fair bit of expectations from the Union Budget 2017 (annual budget of India). Many industry players expected last week’s budget announcement to offer reductions in existing tax structures, various incentives for R&D expenditure and promotion of hybrid and electric vehicles (EVs), and lower interest rates on auto financing. Some of the key items on the industry’s wish list were:

  • In order to support and boost government’s ‘Make in India’ program aimed at encouraging companies to manufacture their products in India, the industry expected some impetus in the form of lower taxation and other financial incentives

  • To increase vehicle sales, the industry expected lower interest rates on auto financing and larger fund allocation for the development of mobility infrastructure

  • EV and hybrid carmakers hoped for various tax exemptions and subsidies under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME) scheme

  • OEMs expected the government to continue its 200% weighted deduction on R&D expenses

  • Industry players hoped for further clarifications with regards to incentives, timeline, etc. for vehicle scraping policy

What was received

  • Slashing 5% of corporate tax for enterprises with turnover under ₹500 million (US$7.4 million). This will benefit tier-2 and tier-3 auto components manufacturers and help them in further expanding their business as well as their R&D capabilities

  • The government earmarked ₹1,750 million (~US$25.9 million) in funding for the FAME scheme, which will further enhance the promotion of eco-friendly vehicles in the country


EOS Perspective

Although there were no substantial announcements in the budget that could directly benefit the auto industry, it surely has provided growth opportunities for it. Firstly, the government has increased its fund allocation by 11% to ₹640 billion (US$9.5 billion) for the development of national highways. In addition, 2,000 km of coastal roads are planned to be developed to improve the connectivity of ports and remote villages. These measures are expected to fuel demand for commercial vehicles in the coming years. Secondly, the income tax deduction of 5% for individual tax payers earning under ₹500,000 (US$7,425) is expected to boost personal consumption and spur demand among first-time buyers of passenger cars. Furthermore, the budget focused on boosting rural consumption by allocating more funds through various schemes. It is projected that these schemes will stimulate the demand for farming vehicles as well as two-wheelers in rural India.

For now amid no significant changes, all eyes are on the goods and services tax (GST) implementation expected to take place in July 2017. Industry experts anticipate that the rollout of GST will not only help to standardize various tax aspects, but it will also reduce costs across the industry’s entire supply and value chains. Therefore, a significant share of the impact will be seen only after the implementation of GST. Given the current scenario, we anticipate growth in the industry to rebound largely driven by government’s strong focus on enhancing consumer consumption and infrastructure development.

by EOS Intelligence EOS Intelligence No Comments

E-mobility in Public Transportation – In the Not-Too-Distant Future

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As various countries across the globe are aiming to reduce their dependency on petroleum and tap into comparatively cheaper sources of energy, policy makers are looking at electro-mobility as a way to address energy supply issue in the future. Electro-mobility or e-mobility refers to the concept of using electricity-driven vehicles (also known as electric vehicles) and hybrid vehicles, in order to reduce the dependency on fuel-driven automobiles, while also reducing carbon emissions. Policy makers are focusing on de-carbonization of public transport which is expected to tackle environmental issues such as air pollution, particularly in densely populated regions. Even though consumers remain skeptical about passenger electric vehicles, electrification of public transport adoption rate is stirring at a much faster pace. Being on the fringe for so long, emission-free electric buses and taxis are finally gaining popularity and are being considered the epitome of sustainable transportation. In addition, the infrastructure to support e-mobility, such as battery-operated vehicles and charging stations, is becoming affordable and easier to adopt across the globe.

The electrification and hybridization of transit buses is anticipated to become a global phenomenon by 2020, backed by lower operation costs, tax subsidiaries, strict emission laws, and cash incentives. Hybrid buses are expected to attain a global penetration rate of 9.7% by 2020, while electric buses are likely to reach 5.7% penetration. Leading global manufacturers of hybrid and electric buses (such as Zhengzhou Yutong Group, BYD, Volvo, Zhongtong Bus, Proterra, etc.) have been working on making these buses more attractive with regards to both capital and operational costs. Constant efforts are being made to lower battery cost and increasing battery life.

Various developed as well as developing countries across the globe have already initiated the adoption of hybrid and electric buses and other public transportation, in order to cut down on fuel consumption and carbon emissions.

CHINA

The electrification of public transport has been gaining popularity in China. The Chinese government has initiated several programs, pilot projects, and R&D activities to replace conventional public transportation vehicles with electric vehicles. In 2015, cars, which had been registered before 2005 and were considered to emit excessive pollutants, were removed from the Chinese roads. The owners of such vehicles received subsidies for the purchase of more environmentally friendly cars. The government has allocated approximately USD 1 trillion for electric buses during 2015-2030, in hopes that this will help in lessening the monetary impact from air pollution by more than USD 22.5 trillion in the same period. Such an investment is likely to make electric buses account for 70% of total buses in China by 2020, marking a huge step forward in government-led electric vehicles market.

With a view to encourage the development of electric taxis, the government announced its Electric Taxi Project in 2010 which aimed at introducing 500,000 electric taxis in Shenzhen by 2015. Despite being a promising initiative, the project showed little success due to the lack of charging stations and vehicles’ long charging time. On the other hand, a similar model introduced in Beijing in 2014 was more successful and fueled the addition of a host of electric taxis in the city, along with the development of EV parking lots and fast charging points. With the effective implementation of this venture, the government decided to kick start the Electric Taxi Project in Shenzhen again in 2015, under which taxi operators were offered cash subsidies, along with a 10-year operating license to replace petrol-driven taxis with electric vehicles.

Despite these initiatives, weak electric vehicle infrastructure is one of the key hurdles the country needs to overcome. The government has noticed this issue and steps are being taken to create a sound charging network across the country. The number of public charging piles in the country grew from around 1,100 units in 2010 to 49,000 units in 2015, representing a CAGR of 113.68%. To meet the charging demand of 5 million electric vehicles by 2020, the government has introduced incentive policies with an aim to build 4.8 million charging piles across China.

UK

UK has shown a fair share of commitment to freeing its cities from the harmful effects of fuel-driven vehicles. Efforts are being made by the island nation to promote sustainable public transportation. Transport for London (TfL) has announced its Ultra Low Emission Zone program to introduce 300 single electric/hydrogen deck buses and 3,000 double deck hybrid buses by 2020. The pilot phase of this project will be initiated in 2016 with the introduction of 51 electric buses across two routes in the city. China-based company Build Your Dreams (BYD), the largest manufacturer of pure electric buses, and UK-based Alexander Dennis Limited (ADL), the fastest growing bus builder, together, will be supplying these 51 buses for GBP19 million (USD 26.86 million).

Further, under the new plans by the London government, all hybrid taxis and buses will be able to switch to electric mode when entering certain polluted zones in the city. A ‘geo-fencing’ technology will be used for this purpose, which will allow vehicles to recognize a highly polluted area and switch to a ‘zero emission’ mode. By 2018, it will be mandatory for all new cabs to be electric/hybrid. Additionally, feasibility studies are being carried out as part of another GBP20 million (USD 28.28 million) government scheme for the introduction of plug-in taxis in various cities. The study focuses on finding solutions to reduce the upfront vehicle cost and develop charging infrastructure for taxis.

The UK’s innovative approach with emphasis on R&D for the promotion of sustainable transportation could potentially be a game-changing movement in its fight for an emission-free country.

INDIA

India is one of the few developing countries that has been paying attention to reducing carbon emission and tackling air pollution caused majorly by transportation. In 2013, the Indian government introduced The National Electric Mobility Plan 2020. The ambitious plan aims to create a paradigm shift in the country’s transportation industry, through a combination of policies intended at introducing 6-7 million electric/hybrid vehicles in the country by 2020. With a total outlay of INR 140 billion (USD 2.1 billion), the plan includes the acquisition of vehicles, development of infrastructure, R&D, etc. Under Phase I of the scheme, pilot projects have been initiated in metro cities, state capitals, and cities of the north eastern states. For instance, in Delhi, the plan intends to convert 150,000 diesel buses into electric buses in the first phase. In 2016, BMC (the Municipal Corporation of Greater Mumbai) announced its plans to convert 25-30 existing diesel buses into electric buses having received a grant of INR 1 billion (USD 1.5 million) for the project. In another project, the central government has sanctioned INR 5 billion (USD 7.5 million) to purchase 25 electric buses to operate in Himachal Pradesh state, especially to be operated between Manali and Rohtang Pass.

The plan also encouraged the promotion of electric three wheelers (e-auto rickshaw or e-tuktuk). Despite having proved to be a successful model in countries such as the UK, the Netherlands, and Italy, this type of vehicle was initially met with skepticism in India. However, over the past six years, it gained popularity and soon the roads in the capital witnessed a surge in the number of e-rickshaws (about 100,000 e-rickshaws by 2014). Various companies such as Bosch India, OK Play, and Kinetic Group have developed indigenous e-rickshaw prototypes with a view to tap into this INR 500 billion (USD 7.49 billion) industry. The Indian government has also shown support and is considering offering motor-vehicle tax exemption and credit on the purchase of e-rickshaws.

Despite the high initial cost of procuring these vehicles and implementing the plan, the absence of carbon emissions, reduction in idle motor energy loss at bus stops, and silent running of the vehicles are some of the strong arguments that could help pave the way in creating a sustainable public transportation system based on e-mobility in urban India.

Penetration of E-Mobility

E-Mobility in Public Transportation Faces a Set of Own Issues
Despite its numerous benefits, e-mobility in the public transportation sector comes with its own share of challenges. While lack of charging infrastructure and high cost of electric buses are the two key roadblocks to the smooth adoption of EVs, the industry faces several other challenges, such as limited funding availability (from states), service levels of EVs not matching up to those of conventional buses, demand charges levied by electricity providers resulting in higher operation cost, and significant impact on electricity grids.

Inadequate charging stations infrastructure is the key problem faced by various countries which are in the process of rolling out electric buses and taxis system that needs to rely on a solid charging infrastructure network to support public electric vehicles. A weak charging infrastructure not only limits the vehicle to short range commutes, but might also postpone the transformational shift to electric vehicles. For instance, Car2Go, Daimler’s electric car sharing rental launched in San Diego, USA in 2011, might switch its fleet from electric to gas due to a weak charging infrastructure available in the region. On an average, about 20% of the fleet remains unavailable due to the lack of electricity required for the car to be driven.

Another aspect that impacts the availability of a robust charging infrastructure especially for e-buses is the unavailability of adequate power source close to existing bus yards. Bringing power to the current yards/parking stations may require additional efforts and costs with regards to excavation, cabling, etc.

In addition, the cost of electric vehicles in the public transportation segment, particularly of electric buses, is considered very high. These buses cost almost 2-3 times more than conventional buses. The initial investment in electric buses seems massive vis-à-vis their diesel counterparts. This could prove to be a major hindrance as countries aiming for a sustainable public transportation system could easily switch from diesel buses to low emission gas buses, which are comparatively cheaper when compared with electric buses. For instance, Australian Tasmania’s public bus company considers the technology behind electric buses ‘too expensive and experimental’. An electric bus costs around USD 1 million, almost twice as much as the diesel-fueled bus. Thus, in order to reduce the environmental impact of diesel-fueled buses, the state is focusing on introducing gas-fueled buses whose prices range between USD 500,000 and USD 670,000 making them much less expensive than electric buses.

The problem of high purchase cost is paired by the issue of financing of electric vehicles, which is another hurdle to the widespread adoption of such buses. While the reduction of transportation CO2 emissions features as an important target for most governments and municipalities, stringent budgets and lack of funding often make these plans harder to achieve. For instance, in January 2016, Ireland-based Dublin Bus was refused funding for the lease of three trial hybrid buses costing EUR 900,000 by the National Transport Authority (NTA), due to lack of availability of funds. The rationale stated by the NTA for the refusal was that adding fewer hybrid buses in place of diesel buses (which are relatively cheaper) will result in lower number of public buses on the street, which in turn will translate into a significant rise in the number of car journeys, consequently leading to greater environmental damage. This Irish example might indicate that the adoptability of electric vehicles can only be successful in countries where the government is willing to make vast long-term commitment towards the purchase of electric vehicles for public use.

The challenges do not end there. While electric buses are considered to be more cost efficient with regards to operations, pure electric buses, in most cases as of now, are not capable of delivering a non-stop 18-hour service cycle that is achievable by most conventional buses, without stepping out of service for recharging their batteries. Moreover, most electric buses are currently not suitable for challenging environments (such as rural or hilly regions), which in turn limits their adoptability, while traditional buses have long been used in a great variety of terrains.

The operating cost advantage of electric buses is further impacted by the frequent application of ‘demand charges’ by electric utilities, especially in case of pilot/trial projects. For instance, in California, the application of demand charges increases the operation cost (which stands at about USD 0.25/mile without any demand charges for electric buses) by about USD 0.24/mile for one electric bus charging overnight and by USD 0.90/mile for one electric bus charging on-route. This significantly impacts the operating cost benefits that make electric buses attractive (the fuel cost per mile for diesel bus is approximately USD 1/mile). However, with the rise in number of electric buses, the demand charges can be spread over a larger number of buses making on-route charging more economically viable. For instance, if the number of electric buses rises to four or eight, the operation cost increase is reduced from USD 0.90 to a mere USD 0.42 per bus or USD 0.29 per bus (respectively) for an on-route recharge. Thus the greater number of buses, the lower the demand charges per bus. To support the deployment of electric buses, it is essential that electric utilities pardon demand charges for plying electric buses till the time the bus operators manage to increase the electric bus numbers to make them economically feasible.

EOS Perspective

While electrification of public transportation is not easy to achieve considering the vast set of challenges faced by the industry, the global market for electric and hybrid buses offers huge growth potential as several leading economies such as the USA, Canada, UK, Germany, France, China, and India are making a conscious effort to switch to electric and hybrid fuel systems for public transportation. Electric buses not only help address rising pollution and environmental concerns but also offer lower operational costs, which is a key driving factor for their growing acceptability. According to experts, all of these advantages of electric buses are likely to spur the industry to grow at a forecast CAGR of 20-27% during the next five years (2016-2020). This is also supported by an ongoing effort by the leading hybrid and electric bus manufacturers, who are working to expand their product portfolio with innovative and cost-effective solutions that suit different countries’ requirements and road conditions. While currently, in real terms, the number of electric buses across the globe seems very limited, the industry is sure to have a bright future.

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