Answers to EV policy-II

Study: The luxurious electric car, Tesla, will not be seen on Bhutanese road as the car is expensive and the manufacturer finding Bhutan a too small market.

After driving it for a year, the Prime Minister has returned the car to the manufacturer. The car was sent to Bhutan for a three-month test drive. Kuensel learnt that Lyonchoen had asked the officials to send the car back to the manufacturer, but the company wanted to keep the car in Bhutan.

Although the vehicle was tested and driven by Prime Minister himself, officials said the vehicle was not affordable.

Its return could take time with the initial purchase price of EVs projected to fall from 2025 to the extent that it could be comparable to other fuel-driven vehicles. This could possibly be achieved on the back of falling price of EV batteries. Batteries form a large part of cost of EV.

Apart from Tesla, current EVs technology is best suited for customers driving less than 120 KMs a day, a World Bank’s study on EV scenarios, implications and economic impact in the country said.

International experience, the report stated has indicated that range is a critical factor in consumers purchase decision.

The study indicated that EV leading markets are countries where vehicle market is mature and ownership already saturated. For instance, 42 percent of households in Norway own more than a car and most of the households own EV as their second car for short trips.

Because of high cost of EV in Bhutan, the report stated that large part of population cannot afford electric car. Thus, the uptake rate of EV in the market will be the basis for designing EV programme such as fiscal incentives, plans for charging infrastructure and grid planning.

To access the potential uptake, first factor, the World Bank pointed out is to look at whether travel demand for Bhutanese can be served by EVs.

For this, Thimphu has been chosen as pilot area of implementation because of its smaller geographical size. The city is considered to be aligned with characteristics that EVs offer.

 

Target and factors

Government fleet, taxis drivers and private car owners have been identified as potential target groups of the first phase of EV adoption.

But the report cautioned that different segment of the country’s vehicle market may not be similarly suited to switch to EV because of product uncertainties like driving range, charging time, availability of infrastructure and suitability of EV models.

As per the World Bank’s estimate, average mileage of a vehicle in Bhutan is about 10,000KMs a year. But cost savings for EVs start only after 15,000KM, making total cost of ownership for fuel vehicles less, initially.

It is also highlighted that currently the upfront cost of EV are 140 to 170 percent higher than other vehicles.

Interest rate on vehicle loans was also highlighted as relatively higher in the country.  The chief programme coordinator of GNHC’s Sustainable Development Secretariat, Lhaba Tshering said a dialogue with the financial institutions would transpire in the next phase.

“With the current incentive, a strong financial case exists for taxi market to switch vehicles with an average annual mileage of 50,000Kms to EV,” the report stated.

This again will be determined by taxi driver’s ability to pay higher upfront cost, access to vehicle financing, fast chargers and market opportunities.

Other non-price factors to influence the EV uptake are environment consciousness, convenient charging stations, parking perks and special lane for EV, as is in the case of Norway, a leading EV market.

 

Approach

To reduce the cost and limit the number of stakeholders, the report stated that initial efforts must be focused on stimulating home and workplace charging. “Fast chargers add value to normal charging network,” it stated. Hence a phased rollout of fast charger in pace with EV uptake is recommended.

World Bank’s finding also points towards a collaborative work of stakeholders. For Example, GNHC in addressing service pricing, information and communication ministry for transport planning, Bhutan Power Corporation for power connection and supply and Thimphu thromde for managing land and planning.

GNHC has already pointed out that the effort to reduce the upfront cost of EV will be through concession from the manufacturers, fiscal incentives from the government and donor agencies funding.

Since EVs are new to many in Bhutan, increased public awareness is needed to overcome various biases or reservations.

“A communication campaign that focuses on giving potential consumer objective facts to inform their purchasing decisions rather than aggressive marketing of EV is highly advisable,” the report stated.

 

Impact

The report points out that fuel import could be reduced significantly should the uptake is more than 245 EVs a year. In this case the annual fuel import avoided would come to about 5 percent of total fuel import made in 2012. This will reach 38 percent if the country replaces 6,000 vehicles by 2020.

But again the overall impact of fuel import, the report states, will not be as significant because diesel comprise 70 percent of fuel import.

“The potential of EV policy to contribute to reduce the total trade deficit is limited,” the report stated. This is because reduction in imports due to fuel saving would offset by higher investment required for EVs, again pushing for more imports. It is also influenced by fuel price.

 

Issue of second hand EVs

Import of second hand vehicles in general are in restricted list, not prohibited. “This means that it is the prerogative of the government of the day to lift or to continue the ban,” Lhaba Tshering said.

He said the same clause is applied while importing arms and ammunition in the country, indicating that it was legal.

The basis of restricting imports of second hand cars dates back to 1980s when the country started to import “reconditioned” vehicles from Japan. The reconditioned vehicles, he said were having issues with the emission and consequently it was restricted.

Applying the same logic, he said the restriction would not apply to EVs because these are vehicles with zero emission.

However, after having imported few EVs, government decided to put on hold and relook at the import of second hand EVs following the issue that was raised in the Parliament and few E-taxi drivers complaining of driving range.

Tshering Dorji

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