Akhlaqur Rahman Sachee

While achieving “Net Zero” is becoming a burning issue, the transportation sector, which is a part of our daily lives, is itself responsible for 37% of global carbon dioxide emissions because of its high dependence on fossil fuels. As a part of the global movement, Bangladesh is committed to reducing 21.85% of carbon emissions by 2030. It is a matter of hope that the country contributes only 0.21% of global carbon dioxide emissions, which is far less than the neighbouring country, India. But it is growing at an alarming average annual rate of 7.52%. As the yearly emission of electric vehicles is 77.63% less than conventional fossil-fuel-run vehicles, the launch of electric vehicles can gear up the pace of the country’s journey towards zero carbon footprint.

Global Electric Vehicle Market Outlook

The global electric vehicle market is growing exponentially. As per a report published by the International Energy Agency, 6.60 million units of electric cars, combining the sales of battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) together, were sold in 2021. Sales of electric cars contributed 8.57% of global sales of cars. The number of electric cars running on the streets globally now stands at 16.50 million units as of 2021. China alone accounted for 3.30 million units of sales and had 7.80 million electric cars running on its streets as of 2021. This impressive scenario resulted from the government’s effort to reduce carbon emissions as a part of the country’s 14th Five-Year Plan (2021-2025). On the other hand, 2.30 million units of electric cars were sold in the year 2021 in Europe, which is 65% higher than the previous year. The European market grew at a compound annual growth rate of 61% during the period 2016-2021. The proportion of electric car sales was higher in Norway, Iceland, Sweden, the Netherlands, France, Italy, and Spain than in others. As of 2021, 5.50 million units of electric cars were on the roads of Europe. In the United States, 630,000 units of electric cars were sold in 2021. The country has over 2 million electric cars on the streets. However, the US electric car market experienced a compound annual growth rate of 32% during the period 2016-21.

In some Asian countries like China, India, and Vietnam, electric two and three-wheelers have gained popularity over the years. Because of their simple manufacturing process and low operating costs, sales increased rapidly. Around 9.50 million units of electric two and three-wheelers were sold in China in 2021. 0.30 million units and 0.23 million units were sold in India and Vietnam, respectively.

Sales of electric buses and trucks are relatively lower than those of cars. Electric buses and trucks accounted for only 0.30% of total sales in this segment in 2021. Globally, 4% of the buses and 0.10% of the trucks are electric variants as of 2021.

Engineering Aspects of Electric Vehicles

Different types of electric vehicles have been developed over the years to give potential buyers choices. Electric vehicles either run on electric motors or the electric motors work in conjunction with internal combustion engines. Depending on how they operate, electric vehicles can be classified into three broad categories.

1. Battery Electric Vehicles (BEVs): Battery electric vehicles are also called all-electric vehicles, as these vehicles run with the help of electric motors only. There is no internal combustion engine. Hence, these vehicles generate no emissions. The electric motors are powered by batteries, and there are very few moving parts, which results in a lower cost of maintenance. There can be one or more electric motors, depending on the models. Tesla Model 3, Volkswagen ID.4, Kia EV6, BMW i3, etc. are some of the popular battery electric vehicles.

2. Plug-in Hybrid Electric Vehicles (PHEVs): Plug-in hybrid electric vehicles are also called series hybrids. A plug-in hybrid electric vehicle has both electric motors and an internal combustion engine. These vehicles can be operated in two modes. In all-electric mode, a plug-in hybrid electric vehicle runs only with the help of electric motors. Whereas, in hybrid mode, electric motors and an internal combustion engine power the vehicle together. The batteries can be charged externally. Also, the regenerative braking system is there. Plug-in hybrid electric vehicles offer higher fuel efficiency while performing in line with conventional cars. Some of the popular choices of plug-in hybrid electric vehicles are Toyota Prius, Mitsubishi Outlander PHEV, Hyundai Sonata, etc. However, the emission is higher than battery-powered all-electric vehicles.

3. Hybrid Electric Vehicles (HEVs): A hybrid electric vehicle has both electric motors and an internal combustion engine, like plug-in hybrid electric vehicles. However, the batteries cannot be charged externally. They are automatically charged with the help of the regenerative braking system. Most hybrid electric vehicles cannot run on batteries alone. The electric motors mainly assist the internal combustion engine to offer better fuel economy. The emissions are higher than those of battery electric vehicles and plug-in hybrid electric vehicles. Toyota Camry Hybrid, Honda Civic Hybrid, MG ZS, etc. are some of the popular hybrid electric vehicles.

It is to be noted that plug-in hybrid electric vehicles and hybrid electric vehicles produce emissions that are directly released through the tailpipes. Though battery electric vehicles do not produce direct emissions, there can be evaporative emissions.

There are more than 450 models of electric vehicles available on the global market. All-electric vehicles mostly come with sedan-style bodies, whereas most of the electric cars with SUV-style bodies are plug-in hybrid electric vehicles. However, the range of choices is widening every day, as some of the most renowned car manufacturers are planning to shift to electric vehicles completely. Toyota is targeting to sell 3.50 million units of electric cars annually by 2030. Volvo is aiming to transform into a fully electric car manufacturer by 2030. Mercedes will only launch fully electric vehicles from the year 2025 and BMW is committed to ensure 50% of the vehicles sold being fully electric by 2030.

Progress of Electric Vehicle Market in Bangladesh

The all-electric vehicle market is almost nonexistent in Bangladesh. However, the country is experiencing consistent growth in the imports of hybrid electric vehicles. A growth of 154% in hybrid car imports from 3,296 units in FY18 to 8,366 units in FY21 has been observed. Lower cost of maintenance and better fuel economy have driven the growth in sales. Hybrid variants of Toyota Aqua, Honda Grace, and Nissan X-Trail have gained much popularity in Bangladesh. Also, there are nearly 4 million electric three wheelers running on the streets of the country. These vehicles are known as ‘Easy Bikes’ to the masses. Though easy bikes are not allowed on the streets of the capital, these vehicles have already become the primary vehicles for public passenger transportation in rural areas. Because easy bike owners use environmentally polluting lead acid batteries and illegal electricity connections to charge the batteries, the industry is quite controversial. Also, easy bikes have safety issues due to their design.

Nonetheless, the government is aiming to ensure mass adoption of electric cars by the year 2030. Through the Automobile Industry Development Policy, 2021, the government has announced its plan to undertake incentive programmes to promote strategic investments with the aim of penetrating regional and global markets with locally produced electric cars. To promote local production or assembly, tax benefits have been proposed. Manufacturers of energy efficient vehicles will be able to enjoy tax holiday for 10 years, if they use 30% locally sourced components in the production process. A waiver of road tax and reduced registration fees will also be offered. A fund titled ‘National Energy Efficient Vehicle Production Fund’ will be created to support the industry. The National Board of Revenue (NBR) has already proposed some amendments to ensure clarity of taxation for electric cars. As electric cars do not have engines, their capacities are expressed in kilowatts (KW). NBR has proposed a tax structure considering that 1 KW is equivalent to 20 cubic centimetres (CC). With the proposed amendment, the tax structure for electric cars now stands as below.

To provide guidance in establishing a wide network of charging stations, ‘Electric Vehicle Charging Guidelines’ have been prepared. The guidelines have suggested a framework for setting up private and commercial charging stations. The government is also planning to launch electric buses for long routes. As a part of this effort, Bangladesh Road Transport Corporation (BRTC) will procure 50 electric buses for long routes like Dhaka-Chattogram.

Manufacturing electric vehicles is also no longer a distant dream for Bangladeshis. Walton Automobile Project has already introduced its first electric bus. However, it will only be used to transport employees within the factory premises. Alongside, Bangladesh Auto Industries Limited (BAIL) is establishing a manufacturing plant on 100 acres of land at Mirsarai Economic Zone. Nitol Motors is also planning to launch its electric vehicle manufacturing plant at Ishwardi. However, both the projects are being delayed due to the disruptions created by the COVID-19 pandemic.

Startups are also performing well in this segment. Palki Motors Limited is a homegrown startup that is offering four-door, four-wheel, battery-swappable electric vehicles starting at BDT 4.99 lakhs. They have already received a good number of pre-orders for their vehicles. The startup is expecting to start delivering pre-ordered vehicles in early 2023. Baagh Eco Motors is another venture in this segment. They are offering electric vehicles with advanced technologies like IoT.

Challenges

The electric vehicle market in Bangladesh is currently in its infancy. To help this market grow and sustain, the government and the entrepreneurs in this segment need to step forward. Some of the challenges the industry is facing are listed below.

Infrastructure

Lack of electric vehicle friendly infrastructure in Bangladesh is one of the critical reasons for the growth of electric vehicle market to be sluggish. The country had only 14 electric vehicle charging stations, whereas the neighbouring country, India, had 933 as of December 2020. To popularize electric vehicles among mass people, wide availability of cost-efficient charging stations must be ensured. High-tech electric vehicles come with advanced features like autopilot, automatic emergency braking system, etc. To utilise the full potential of these features, our roads and highways also need to be renovated.

Affordability

The cost of car ownership is higher in Bangladesh in comparison to most other countries due to higher import duty, registration fees, and advance income tax. Though the country is graduating from the segment of least developed countries, owning a private car is still a luxury for the majority of our population. All-electric cars themselves are very expensive. Import duty and other relevant fees make them out of reach for most of the potential buyers. Our neighbouring country, India, has already cut down the registration fees by 50% for electric vehicles. Import duties have been reduced as well. More preferential tax treatments towards electric car owners will make the potential car buyers encouraged to go for electric cars.

Policy Support

The concept of converting between CC and KW to charge advance income tax has created some controversies among vehicle importers and manufacturers. They want electric cars to be classified based on horsepower. Also, they have expressed their urge to the government to further reduce registration fees and advance income taxes for electric vehicles. Also, a guideline addressing the design issues and safety concerns of the battery-run three-wheelers needs to be prepared so that the electric three-wheelers complying with this guideline can get official registration. According to a report published a few years ago, the easy bike market in Bangladesh is worth BDT 17,500 crore.

Misconceptions

Though hybrid electric vehicles are gaining popularity in Bangladesh, there is a misconception among buyers that the cost of replacing the batteries eventually offsets the savings on fuel during the lifetime of a hybrid electric vehicle. However, this is not the case. Also, there are misconceptions about the performance and reliability of electric cars. The vehicle importers and manufacturers should come forward and enlighten the buyers regarding the benefits of electric cars and the savings that car owners can enjoy by driving electric cars

It can be clearly assumed that the demand for electricity will keep rising in line with the growth of the electric vehicle market in Bangladesh. If this increased demand for electricity is met with the help of power plants that run on fossil fuels and coal, the benefits of the mass introduction of electric cars will eventually be cancelled out. To reap the true benefits of electric vehicles, it must be ensured that the electricity with which these vehicles will be powered is generated with renewable energy. There should also be a proper guideline for the disposal of the replaced batteries so that they do not pollute the environment. Only then the dream of zero carbon footprint can be achieved.

The author is working as Senior Executive Officer at IDLC Finance Limited and can be reached at akhlaqur@ idlc.com.