EV’s and Auto Trade Policy: Better be ready with proper plan for gradual transfer to EV’s

Although most of us think that electric vehicles (EV’s) are new technology, electric driven vehicles have been in the market for over 100 years. Some of the EV’s were made by reputed car makers such as GM with their Bolt as early as 1951. However, due to the popularity of the ICE vehicles (Internal combustion vehicles), these EV’s never had the edge to come out for large scale production. Until the introduction of the all-popular mid segment Nissan leaf in the 2010 era, most customers did not want to look at EV’s seriously.

However, with the recent challenges in the economic front, partly contributed by the war in Ukraine and the resultant energy crisis worldwide, environmental regulatory framework becoming more and more strict, EV’s are now catching up amidst some of the drawbacks they have as highlighted below.

Meanwhile, in the local market, the discussion on EV’s have come out strongly during the past few months mainly due to the fuel crisis faced by the country and many feel that part of the solution lies with EV’s. However, in order to realize a sustainable result, EV related introduction has to be done with the key areas indicated below being considered or resolved.

1. Ev’s are expensive to buy – Yes it is a fact that an EV can be up to 50-70% more expensive compared to their rival ICE vehicles in the same segment. One key factor for this had been the mere volumes of production, (EV’s have had very low share in the automotive markets over the years, although had a reasonable volume growth in the last 4-5 years.

Modern electric charging centers

(In 2022 grew over 10%) and also factors such as the expensive technological expenses that go into them, the high cost of battery that goes in as a consumable. (EV batteries are mainly made using Lithium which is not freely available worldwide. (and of course the challenges in disposing them as its environmentally hazardous) For example, an EV in the mid segment can cost from US$ 40,000-75,000 and an up market EV can be as expensive as over US$100,000.

This is against the equation of a similar segment ICE vehicle costing US$15,000- 40,000. This means that an EV can cost almost three times the cost of a similar ICE vehicle even without considering the need to replace the battery on a regular basis at an average cost of around 40-50% of the cost of a complete vehicle. (Say replacement needs every 5-7 years). So, considering this fact a wider discussion has to happen in deciding on the way forward for EV’s.

2. Need for infrastructure- generally the range of an EV is seen as a major challenge in promoting EV’s worldwide. Most EV’s have a range of less than half compared to their rival ICE engines. (However, range had improved in the last few years to a great extent) Due to this reason there has to be a strategically laid out set of charging facilities that is a must for successful EV running.

3. Need for extremely high tech network for servicing, fault diagnosis of EV’s. Unlike the fossil fuel vehicles that have simpler engineering, with a wide network of technical know-how, EV’s are much more complicated in managing technical verifications, fault finding (diagnostics) and servicing. (although service needs are much less compared to a fossil fuel vehicle) For example it is not an easy task for an average mechanic to find fault just mechanically without the required software etc., which makes the need to have a good network of equipped workshops to better manage the fleet.

We need to keep in mind that as of now most EV’s are designed to cater to the EU or US related conditions and market needs and not many products are available with designs approved for the Asian markets.

4. Strain on the public electric network – This is one more factor that needs to be properly calculated in terms of the cost in accommodating that many EV’s on the already pressurized national electricity network.

The overall effect has to be calculated if the majority of electric generation is going to be using fossil fuel in turn. If this is the case, a verification has to be made whether it is cheaper to encourage more EV’s and supply electricity that is generated using fossil fuel or it is better to allow ICE vehicles to come in and run using still the imported petrol and diesel. We also have to keep in mind that the demand for ICE vehicles + the demand for fossil fuel itself will decrease in the years to come and all equations have to be against these projected market values. For example, the prices of the fuel can drop by a good percentage in the next few years.

If so, the equation will have to be based on many projected scenarios that can help policy making. (This seems to be happening as most developed countries are going back investing more and more into nuclear and renewable energy as a drive towards being energy independent and also as a more environmentally friendly strategy and this will contribute to lower the demand for fossil fuel itself).

However, the contribution EV’ s will make towards the environment in terms of creating a cleaner air balloon can’t be forgotten, but will have to be compared with the country’s ability to absorb such cost for the luxury of cleaner air. In my view the vehicle import ban in the last few years has posed a hidden opportunity for Sri Lanka as a country.

This is mainly in order to put our house in order in terms of policy. The government has to look at national interest and not the interest of individuals or companies that supports their plans. I think it is time that we have to look at data and make logical decisions and not go by assumptions for political gains.

Technically, for a country with a negative economic outfit the best in terms of productivity and affordability has to be selected. In the auto trade the most economical vehicles that are affordable to the masses have to be imported/locally produced and encouraged.

We should also not forget the fact that we have to spend more to maintain the older fleet of vehicles that will exceed the cost of replacement even if you leave aside the environmental benefits. The import bill of spare parts has already shown a drastic increase, and will further increase in the coming months as most imports of spare parts are only possible now due to import restrictions during the last few years.

Also in the meantime, we have to draw a line in terms of the type of vehicles that can be imported into the country. May be a CIF limit of say us$ 50,000 or 60,000 and a popular engine capacity of up to 2,000cc may be sufficient for the next five-six years when imports are allowed.

Anything over this can be at an extremely higher cost in terms of import duty, so that these vehicles become heavy contributors to the government coffers. Also, as an immediate measure, 2 and 3 wheelers + Commercial vehicles have to be allowed to be imported into the market, as these are the most economical and productive for a country like ours. (Although three wheelers are not the friendliest on the road, it is mainly due to inability of the policy makers regularizing the three wheeler trade) A three-wheeler regulatory authority type of an entity is a crying need for making the job of a three wheeler driver/owner a more professional job and not merely a wayside business. It’s a fact that we all will prefer to go in a four wheeler but need to remember the great saying that “ beggars can’t be choosers” and live with reality.

As per the EV policy, it is better first to be ready with a proper plan in terms of a gradual transfer into EV’s, firstly focusing on the Hybrids + PHEV’s and then shifting to EV’s once the infrastructure is readily available. Once such a policy and roadmap is in place I am sure the long-term EV transition will be successful and sustainable for the country to benefit from such a plan. If not, it will further burden the economy and the general public who will have to compensate for yet another short sighted policy decision.

From an overall point of view, regulation and fixing practical and honest policy by a qualified and professional set of officials is a must for the automotive trade to offer the best for the country as a whole.

The writer is a senior management professional and a leading automotive trade expert in Sri Lanka.

He is also the Ex Chair of the Ceylon Motor Traders Association (The CMTA), with over 30 years in the trade handling some of the world’s leading brands and also dealing with auto industry regulatory authorities.