EV the rise and rise! The end of fossil fuel vehicles
INTRODUCTION
The rise of
electric vehicles (EV’s) is inevitable and is best left to the market. Recent
studies suggest that the economics of EV’s have not crossed the line to be a
commercial choice[1] In
both Australia and internationally we have seen that policy makers can change
the world so that it is not a level playing field. We expect EVs will arrive
soon and will be driven by governments for their own agendas.
THE WORLD BEFORE POLICY INTERVENTION
Today without
intervention in the market EV’s are not favoured because:
1)
Their capital cost is expensive
2)
The cost of their “fuel” is
rising
3)
The availability of fuelling
places is limited but improving
4)
Their re-fuelling time is long [2]
Today EV’s are
suitable as:
1)
The family’s run about / second
car.
2)
A car for people who don’t
travel more than 600km a day
3)
Have time and a place to refuel
/ recharge their EV
Time will see:
1)
Capital costs fall
2)
Re-fuelling locations increase
3)
Re-fuelling times fall.
4)
The weight of the batteries decreases.
James Gerrand
who recent looked at electric cars from a financial adviser’s perspective in Australia
found based on RAC WA[3]
data it is the high capital cost of electric cost which meant they are
expensive (more interest, higher insurance and higher dollar depreciation). The
savings in maintenance and operational costs are far lower than fossil fuel
vehicles but they the not outweigh interest, insurance and depreciation. With
time the new technology will become cheaper.
WHY THE POLICY LEVERSWILL BE APPLIED
Currently in
Australia, as part of the current National Election debate there is a policy
position between the two major political parties. The Opposition is committed
to reducing Australia’s greenhouse gas emissions in Line with its view of the
“Paris Accord” whilst the Government sees it as a matter for the market and
argues Australia is making its fair contribution to the global environment. The
real issue is based on the Oppositions policies 50% of new cars sold by 2030
need to be EV’s. For the market to make this happen something needs to change
and the argument is it means an increase in the cost of or operating cost of
fossil fuel powered cars. Effectively new or more undisclosed taxes(s)
In Australia the
team at Projects RH (www.projectsrh.com.au)
and internationally based from in Singapore the team at Tabatinga (www.tabatingasg.com) are seeing the
concepts of technology neutrality and the level playing field challenged. These
policies levers are used also in regulated economies such as China.[4]
It was well known
in the years before the Beijing 2008 Summer Olympics China had some of the
busiest and most polluted cities in the world. There has been an ongoing push
to reduce the carbon dioxide emissions and the levels of particulates matter in
the air. Since 2017 this has been a
matter of major concern in India too[5].
THE LEVERS
How does the
level playing field get challenged? The variations can be as wide as the regulator’s
emanation.
1)
A compiling tender will have at
least 50% of all business will be electric
2)
An availability fee of USD
2,000 per month will be paid for electric business, USD 500per month for LPG
power buses and USD 10 for diesel powered buses.
3)
The city congestion changes of
GBP 11.50 a day to travel into Central London[6]
plus GBP 12.50 as a day Ultra Low Emissions Zone charge if a Euro 4 petrol or
Euro 6 diesel standards not met[7].
4)
Tax the fossil fuel engine at
the point of sale. This is not novel and occurs in China where the formula is
that engine producers are required to buy green energy credits to the
equivalent of 10% of the expected emissions of the engines they produce. In
2020 this rate will move to 12%.
5)
Direct subsidy including the
provision of free or low-cost recharging centres. We suspect many employers and
car park operators will be pressured into providing work based free recharging
centres.
6)
Reduced or no sales tax on new
EV’s.
7)
Changi allowable emissions.
8)
Prohibition of use of cars
which do not meet a standard
9)
Emissions charges on cars.
10)
Differential registration and
insurance costs.
11)
Mandating – e.g.; government
bodies and tenders to government must buy only EV’s.
12)
Differential parking fees and
priority areas for EV’s with free recharging stations.
13)
Differential import duties and
sales taxes.
14)
Differential depreciation and
treatment of interest payments for tax.
15)
The introduction of new fuel
taxes on fossil fuels and on emissions
16)
Limiting the life of a car with
a fossil fuel engine to 5 years with a dumping/export fee vis 10 years for an
EV with the aim of recycling the vehicle and especially the battery metals – so
paying a salvage bonus.
17)
Reducing the availability of fossil
fuels – restricted hours of sales and locations.
These are only a
few of the levers which can be pulled by policy advisers. For many of the
countries with high levels of pollution fossil fuel emissions reducing the volumes
of oil and oil products which is imported is significant for their balance of
payments. So in a country like China, which imports a lot of oil and LNG (plus
whilst from Australian eyes is a major importer of its coal) in China’s energy
mix the amount of imported coal is relatively small and reducing. The second
argument maybe that fossil fuels may need to be burned to make the marginal
electricity used to power EV’s. There are two key responses to this with carbon
capture a lot of this and especially the particulates can be captured and
pragmatically fossil fuel power stations can be located away from major
centres.
We also suspect
we will see a lot of advertising as to shape community expectations / education
as we saw with the attacks on the consumption of tobacco products and with AIDS.
As part of this change,
we can expect to see a move to autonomous vehicles. Their success in the
international mining industry is well known. When we travel on the SMRT
(Singapore underground rail system) we don’t think “there is no driver”. It was
built that way. In the US and Australia autonomous cars they are not legally
allowed on the roads. Their time will come when their cost drops and our minds
shift[8].
There will need to be testing and proof with recent events with the Boeing 737-
-Max8 will mean that the software will be challenged. In March 2018 an
autonomous Uber did kill a woman but the software will be fixed and tested.[9]
CONCLUSION
Democracy and other
governments which want popular support need to deliver what the people want
whether it is technically right or not.
If the people
want clean air and believe EV’s are a key part of it we will end-up with the
political leavers being used to deliver EV’s. Cost and economics are secondary
arguments when it comes to being “the government”.
For
organisations like Projects RH and Tabatinga who are already working on tenders
for EV in the public transport systems in Australia and internationally, we can
expect to see this extended to cars, open-cut mining equipment, trains and
other commercial vehicles.
We believe that
there will be a huge opportunity for some as we all come to terms with a new
normal.
Paul Raftery
[1] See Gerrard, James, Electric cars – a value
assessment”, The Weekend Australian, April 13-14, 2019, p. 34 or https://www.theaustralian.com.au/business/wealth/electric-cars-a-value-assessment/news-story/cac666a67347d4018b90efb2545ab529&
[2]
There is an ongoing debate over rapid chargers and the alleged battery
damage.
[3] See Frost, Alex; “New electric vehicles
coming to Australia in 2019”, 20 November, 2018 see https://rac.com.au/car-motoring/info/future_new-electric-vehicles-coming-to-australia-in-2019 accessed 14-04-19.
[4] See “Great Wheels of China”, The Economist, April 6th, pp.
18-20 or on-line as “China’s plans for the electrified, autonomous and shared
car future : https://www.economist.com/briefing/2019/04/04/chinas-plans-for-the-electrified-autonomous-and-shared-future-of-the-car
[5] See
Steven Bernard and Amy Kazmin Dirty air: how India became the most polluted
country on earth, Financial Times, 11
December, 2018: see: https://ig.ft.com/india-pollution/
[7] See:
https://tfl.gov.uk/modes/driving/ultra-low-emission-zone?intcmp=26434 Note for buses and trucks over 5 tonnes
which don’t comply the charge is GBP 100.
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