CEGSDISCUSSIONPAPER SERIES

No.2018-CEGS-01

Barriers affecting the growth strategy for electric vehicles
ミハイル
横浜国立大学マリノフ

成長戦略研究センター

リサーチャー2019 年 3 月

横浜国立大学

成長戦略研究センター

Center for Economic Growth Strategy(ＣＥＧＳ)
Yokohama National University
79-4 Tokiwadai hodogaya-ku
Yokohama 240-8501 JAPANCEGS

Barriers affecting the growth strategy for electric vehicles
Discussion paper
Mihail Marinov
1. Overview of alternative fuel vehicles
Electric motors have been traditionally considered best fit for light duty vehicles(i.e. cars, vans, and possibly light trucks), because the electricity demand of heavy duty
vehicles (HDVs) is generally thought to be too great to be met without a significant
number of batteries which adds considerable weight to the vehicle. However, pure
electric buses and diesel electric hybrid are beginning to operate in a number of cities,
and with gradual improvement in battery performance, heavy duty battery electricvehicles (BEVs ) may potentially be feasible within a decade (Boer et al., 2013).
Trials have been made with wireless recharging technology for buses in order toinvestigate whether battery electric buses can match the performance of diesel buses.
For example, in 2014 electric buses already began to operate in Milton Keynes, England.
The batteries of the buses are charged with the help of an induction coil that is buried in
the road. There is also a second coil on the bus. Two thirds of the energy consumed by
the electric bus can be replenished in approximately ten minutes when the bus is parked
over a coil. The induction coils in the road are set up at three locations and the buses canalso be charged during the layover time at the ends of the route. In addition, in the UK
the feasibility of induction charging for EVs on the move is being investigated, and in
Korea a similar project involving a 12km highway section has been demonstrated.
Regarding heavy duty vehicles (HDVs), it is considered that gas is the bestalternative fuel, particularly for long-distance delivery vehicles in the short to medium
term, but it is also used in light duty vehicles in a number of European countries,
particularly in Italy.
Electric vehicles (EVs) have a surprisingly long history, beginning in the last yearsof the 19th century when the first EV appeared. However, by the 1930s the internal

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combustion engine (ICE) had replaced EVs, and BEVs reappeared on the market only inthe 1990s. However, a renewed interest in the technology has emerged in the last decade,facilitated significantly by the need to reduce carbon dioxide (CO2) emissions. Vehicles
with that technology have virtually zero exhaust emissions, however, their life-cycle
emissions (i.e. CO2 released in various activities related to the generation of electric
power) also depend on the fuel used at the power station, therefore, until power
generation is totally CO2 free, there will not be a genuine zero emission vehicle.
Moreover, there will also continue to be a certain amount of non-exhaust emissions suchas particulate matter (PM) that will be emitted into the air due to tire and road surface
wear.
Regarding the recharging of EV batteries, intelligent technology strategies areunder development that will make it possible for EVs to be recharged in a way that will
enable efficient and effective management of electricity demand and the fluctuations
that are inherent in the generation of renewable electricity. The recharging of EVs in
accordance with electricity production patterns will be enabled by the so-called “smart
grids”, however, thee grids requires a completely new form of managing and organizing
the interface between the energy sector and the transport sector.
The first limited production of HEVs began in Japan in 1997, followed by plug-in
HEVs (PHEVS) in 2004. The general sale of BEVs by a volume car maker first started
in Europe in 2011 (Al-Alawi and Bradley, 2013), although, it has to be mentioned that
small manufacturers had already introduced a few niche models in certain European
countries. Yet, it is clear from the sales data that the vast majority of new car sales, notonly in Europe, will continue to be that of vehicles powered by ICE, and it is likely that
this will continue to be so in the following decade and beyond. The sales data also showthat all other alternative mobility technologies together accounted for less than 4% of
new car sales in EU in 2014. Most of these alternative mobility technologies were gas(1.9%), HEVs (1.6%), with BEVs amounting to just 0.3% of new car registrations in the
EU (International Council on Clean Transportation, 2015a).

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Road vehicles using gas have a long history too, with the first models also being
produced towards the end of the 19th century. In the first and second world wars
vehicles burning gas were used as an alternative to gasoline, which was in short supply.
Sizable gas containers were placed on the vehicle roofs, range was not particularly long
because the gas in the containers was not compressed. Among the alternative fuels in
Europe, liquid petroleum gas (LPG) is the most widely used. The market share ofvehicles using LPG was 3% of motor fuels, and approximately 6 million cars in the EU
were running on LPG in 2013 (European Commission, 2013). The refuelinginfrastructure LPG vehicles is well established, having approximately 28,000 refuelingstations in the EU but these are not distributed evenly. Compressed natural gas (CNG)
technology is also well-developed and more then 1 million vehicles on the road in
Europe are running on it, with around 3,350 filling stations in the EU. However, the
CNG infrastructure is also unevenly distributed because more than half of the refiling
stations are located in Italy and Germany (European Commission, 2013).
The highest proportion of natural gas cars in the EU can be found in Poland and
Italy where approximately 2.5 million and 1 million vehicles respectively are runningon natural gas. It is interesting to note that in Poland a significant number of the cars are
actually old gasoline cars that have been retrofitted to use LPG, although new LPG car
models are available on the market.
Gas vehicles appear to be more popular in certain Asian and South Americancountries where there is an ample supply of natural gas. However, government policies
in the majority of European countries promote the use of EVs (and HEVs) over gas
vehicles (Engerer & Horn, 2010).

2. Barriers affecting EV market strategy
Regarding EV market strategy, it has to be emphasized that there are significant
market barriers to the purchase and use of BEVs and PHEV (plug-in hybrid electricvehicles). These market barriers include:3

Vehicle purchase price
Running costs i.e. the cost of replacement batteries
Fuel/charging infrastructure
Driving range
Charging time
Limited choice of models
Limited consumer acceptance2.1. Consumer acceptanceAcceptance, which appears to be the main factor affecting sales of alternative fuelvehicles is generally not high in Europe, although there is a number of exceptions.
These are the HEV market in the Netherlands, the BEV market in Norway, the natural
gas fuel vehicle market in Italy, and the ethanol fueled car market in Sweden. Also, thesales of EVs in France are higher than Norway but their market share is significantly
smaller. Government policies regarding the promotion of alternative fuel vehicles inthese countries appear to have affected the choice of consumers (International Council
on Clean Transportation, 2015b). However, compared to Japan for example, even inthese EU markets alternative fuel vehicles are relatively rare. In Japan more than 20%
of new car sales are HEVs. Moreover, if “kei” cars which are unique to Japan(light-weight cars with engine capacity less than 0.66 liters) are excluded, HEV willaccount for 30% of the new car market (International Council on Clean Transportation,
2015c). Similarly to the above-mentioned EU countries, this significant market share isdue to government subsidies and other fiscal incentives (Alhulail and Takeuchi, 2014).
The strong co-relation between government incentives and EV sales has been shown by
a survey of consumer attitudes to BEVs and HEVs in six EU countries, conducted by
the European Commission’s Joint Research Centre, which revealed that car drivers
considered that public incentives are needed in order to increase EV market share (Thielet al., 2012).

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In the USA, the experience of the state of California which mandated EVs (without
significant subsidies) implies that the use of fiscal and other incentives is probably thebest method of increasing the market share of low emission vehicles. California has along history of making attempts to promote low emission vehicles, beginning in 1990
when the California Air Resources Board (CARB) decided that 2% of vehicles on salein California in 1998 and 10% in 2003 must be zero emission vehicles. Seeing that the
car market could not comply with that decision, in 1996 CARB withdrew the 1998
requirement and in 2001 reduced the 10% requirement to 2% electric or hydrogen fuelcell vehicles, 2% HEVs and 6% ultra-clean gasoline vehicles. These demands still could
not be met, so in 2003 CARB changed its policy again to include a complex system ofbanking credits. The final change in 2008 focused on promoting the development of
PHEVs (Union of Concerned Scientists, 2015).
The purchase of a new car is a major decision for the average consumer. Drivers
are typically skeptical of new automotive technologies because of the high purchasecosts and the relative shortage of information on these new technologies, and are
generally cautious when choosing new vehicles. For example, resale value appears to bea major source of concern for potential users of EVs. Also, wide acceptance of new car
technologies may take years to achieve, as demonstrated by the fact that it took six years
for Toyota Prius HEV to begin to have a more global impact after its initial launch(Beltramello, 2012). Moreover, new automotive technologies are generally introduced
at the luxury end of the car market before reaching down over time. The length of thattime in the EV market appears to be long mainly because these vehicles are usuallypurchased as replacements for cheaper and smaller cars. Compared to the upper end
market, buyers in the lower-end market are often unwilling to risk purchasing atechnology they are not familiar with, and therefore it may take longer for these vehicles
to gain a wider acceptance. This characteristic of the market may change, however,largely due to the launch of the first premium EVs targeted at the mass market in 2012
(Figenbaum & Kolbenstvedt, 2013). The Tesla Model S has a very rapid acceleration,

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being able to reach 60 mph in 4.2 seconds, and it became the top selling car in Norway
towards the end of 2013.
In 2014 the best selling EVs were made by Renault-Nissan (26% of the world
market), Mitsubishi (12%), and Tesla (10%). These car makers each sold more than
30,000 vehicles in many world regions. Next are General Motors, Ford, and Toyota,
with 6%-8% each of global sales, which are mainly generated by customers purchasing
PHEV in the US market (International Council on Clean Transportation, 2015a).
In the literature it has been suggested that one of the main reasons for the successof the Tesla may be dealer understanding of how to sell EVs. The purchase experienceof consumers has been shown by a survey to be the best with Tesla, whereas evidence
from California suggests that conventional car dealers do not excel at selling EVs anddo not seem to provide enough information for potential buyers. The conclusion is that,compared to conventional car buyers, EV buyers appear to have greater demands thatare difficult to meet for most car dealers. This difficulty may partially be explained by
the inability of the profits generated by the sale of EVs to convince more car dealers tosell EVs (Cahill et al., 2014).
The existing literature also argues that demonstration projects may facilitate theincrease of public awareness regarding BEVs since it appears that a large number of car
drivers are not familiar with the characteristics of these cars and their differences fromconventional cars (Thiel et al., 2012). A large scale BEV trial was conducted in the UK,
involving more than 300 vehicles, which showed that drivers considered BEVs to besmooth and fun to drive, with their acceleration receiving universal acclaim. Moreover,
over a third of the people who participated in the trial stated that their EV performed
significantly better than their normal car, 80% were inclined to replace one of theirvehicles with a BEV, and 50% wanted to purchase an BEV after the end of the trial.
However, 60% also said that they would still need to own a conventional vehicle as a
backup. Factors that affected the drivers intentions to buy a BEV included the price,which they anticipated to be the same as a conventional car, resale values in the6second-hand market, battery life, maintenance costs, insurance, and how quickly thecurrent technology would be further improved (Carroll et al., 2013).

A. Fiscal incentives
The majority of EU countries have introduced forms of fiscal incentives based on
the CO2 emissions or the fuel consumption of vehicles and aiming to encourage thepurchase and use of vehicles with lower emissions. These incentives are part of ageneral package of measures aimed at reducing CO2 emissions to meet European Union(EU) and other emission reduction targets. In addition, the widespread adoption of EVs
and gas vehicles in urban areas is also expected to influence air quality positively.
However, despite the extensive fiscal incentives and ambitious targets adopted bynational governments, a broad consensus exists in academic and practitioner circles thatEVs will continue to constitute a small proportion of the total vehicle sales for at least
the next decade and that gasoline and diesel vehicles will continue to hold the dominantmarket share (Beltramello, 2012). To give just one example, in 2020 EV sales inGermany and the UK will have to be 1 million and 750,000 respectively to meet thetargets of the German and the UK governments (Elkins and Potter, 2010). In
comparison, in 2015 the annual new car sales were around 3 million in Germany and2.5 million in the UK (International Council on Clean Transportation, 2015a).
As mentioned previously, fiscal incentives appear to be effective in increasing themarket share of EVs, which is supported by evidence from Norway, Japan, and the US.
For example, the relative efficacy of US income tax credits, sales tax waivers, andnon-tax incentives aimed at increasing HEV sales was investigated by Gallagher &Muehlegger (2011) who found that the most effective fiscal incentive was state tax
waivers even in situations where the income tax credits were more significant.
According to an estimation in that study, sales tax waivers generated a more thanten-fold increase in HEV sales compared to income tax credits.

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B. Non-fiscal incentives
In the literature there is also evidence that in certain cases the popularity of EVs
can be increased with the help of non-fiscal benefits. Gallagher & Muehlegger (2011)
found that permitting single occupancy HEVs to be driven in high occupancy vehicle(HOV) lanes in general did not increase HEV sales. There is one exception, however, inthe state of Virginia, where access to HOV lanes generated a 92% increase in HEV sales,
which also reflects the fact that a number of HEV owners in that state use these lanes tocommute to and from Washington DC. Bus lane access increasing BEV sales around
Oslo in Norway also provides similar evidence. It appears that access to bus lanes is asignificant form of time-related incentive whose effectiveness is co-related to the degreeof congestion in urban areas.
Apart from taxation policy which is usually decided nationally, other fiscal andnon-fiscal incentives can be found at the regional or local level. These may include
exemptions from toll and parking chargers, the above-mentioned access to bus lanes,
and, last but not least, reduced restrictions on parking .

2.2. Fuel/charging infrastructure
Another existing barrier to BEVs and PHEVs is the still inadequate recharging
network in many world regions (Thiel et al., 2012). Although a large part of theinfrastructure is present because electricity grids are relatively well-developed, asatisfactory network of charging points remains to be developed. In the EU for example,
the estimation is that at the end of 2012 there were more than 25,000 private and almost
30,000 public charging points dedicated for EVs. Most of these are found in France.
According to government public announcements, the network of charging points is
supposed to increase significantly in France, where in 2020 it is expected that there will
be more than 4,000,000 charging points. In the rest of EU, however, only 600,000
points are expected to be ready by 2020 (European Commission, 2013). A new EU
Directive on the deployment of infrastructure for alternative fuel vehicles was adopted

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in October 2014, aimed at encouraging the development of fueling and recharging
networks.
However, evidence from Norway suggests that a relatively small number of BEV
drivers actually use the public charging network, being more inclined to re-charge theirvehicle batteries at work or home (Haugneland and Kvisle, 2013). In theabove-mentioned UK trial, 75% of the BEV drivers stated that they prefer charging theirvehicle at home to going to a petrol station, due to the associated freedom of doing theprocedure at home. Before the trial, 87% of the non-corporate drivers (people who
privately own EVs) said that public charging infrastructure is need, but this proportion
decreased to 71% after three months, even though 79% of the drivers stated that they
could finish their journeys without using a public charging infrastructure. It was also
revealed that the distance covered between two charging stops increased over time asdrivers became more reassured of the battery capacity (Carroll et al., 2013).

2.3. Limited choice of models
Another constraint to increasing the EV market share has been the relatively small
number of EV models on the market. For example, in 2001 there were only two HEV
models on the market in the EU (Toyota Prius and Honda Civic), and only 2,200
vehicles were sold. In more recent years 30 HEV and PHEV models are available andmore than 200,000 are sold. However, these vehicles account for only 1.6% of newvehicle sales in the EU. Despite this, nearly 25% of all new Toyota cars sold in the EU
were HEVs (International Council on Clean Transportation, 2015a).
One characteristic of the modern car market is that it is highly segmented, withbuyers frequently deciding the category (which can be from compact to sports andluxury) before the model and the make. The current production of HEV, PHEVs, BEVs
and gas vehicle models is still limited from the perspective of brands and vehicle
segments. Consumer requirements for practicality, comfort and size to determine thechoice of vehicle segment to a large degree on one side, and brand choice reflects more

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emotional factors such as vehicle image, perceived reliability and brand attachment on
the other. It has to be pointed out, however, that the model diversity of alternative fuelvehicles displays considerable variety across alternative fuel types and vehicle
segments.

Table 1: Fiscal incentives for electric vehicles in a number of EU countries (European
Environment Agency, 2014)

Country

Annual/Purchase/monthly
circulation

Fuel tax

Company

Businessregistrationcarincentives

subsidy or tax

taxation

Other

EV +
PHEV
marketvehicle tax

share
(%)c

Austria
Belgium

Yes
Yes

Yes

0.6
Yes

Czech

0.4
Yes

N/a

Republic
GermanyYes

0.4

Denmark

Yes

0.9

FinlandYes

0.4

France

Yes

Yes

0.7

GreeceYes

Yes

Hungary

Yes

Yes

N/a

Yes

0.2

Ireland
Italy

Yes

Yes

Latvia

0.1

0.1
Yes

N/a

Netherlands

Yes

Yes

6.8

Portugal

Yes

Yes

0.2

Yes

N/a

Romania
Sweden

Yes

Yes

Yes

UK

Yes

Yes

Yes

1.6
Yes

0.6

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Table 2 Alternative Fuel Market Share (%) of New Passenger Cars in the Netherlands andthe UK (International Council on Clean Transportation, 2015a)

Market share of new passenger cars (%)
Netherlands
HybridYear

UK
Natural

Flexi

Electric

Gas

Fuel

(including

HybridNatural

Flexi

Electric

Gas

Fuel

(including

PHEVs)

PHEVs)

2003

0

0

0

0

0

0.1

0

0

2004

0.2

0

0

0

0.1

0.1

0

0

2005

0.6

0

0

0

0.2

0

0

0

2006

0.7

0

0.1

0

0.4

0

0

0.0

2007

0.7

0

0.1

0

0.7

0

0

0.0

2008

2.4

0

0.1

0

0.7

0

0

0.0

2009

4.2

0

0

0

0.7

0

0

0

2010

3.3

0.4

0

0.

1.1

0

0

0.0

2011

2.7

1.1

0.1

0.2

1.2

0

0

0.1

2012

4.5

1.8

0.1

0.2

1.2

0

0

0.1

2013

5.7

0.6

0

5.4

1.3

0

0

0.2

2014

3.7

1.0

0

4.0

1.5

0

0

0.6

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