FIA University Report: Developing sustainable mobility

DEVELOPING SUSTAINABLE MOBILITY

Incentives for personal electric vehicles in the world

Examples from China and Rwanda

This report was produced with the support of the FIA Foundation.

AUTHORS:

Corentin BOUYER, Cassandra DAHMANI, Alex J. KICZALES, Maxime TEILLEUX, Jiayi WANG Students of the “Governing the large metropolis” Master’s Degree, Urban School of Sciences Po Paris.

Are grateful for the input of our partners and contributors:

Our research partners: Luca PASCOTTO at the Fédération Internationale de l’Automobile (FIA), Philip PURNELL, Cyriel PELLETIER and Olivier ECHEGU at Sciences Po.

Our interviewees:

In Europe: Monica BERG and Alexander TOOP (ADAC) Diogo PINTO (FIA)

In China:

• Shiyue MAO (ICCT)

• Ning WANG (Tongji University)

• Yi XIE (Fudan University)

• Xiaoxu ZHOU (FIA)

In Rwanda:

• Ahmed BIYABANI and Barry RAWN (Carnegie Mellon University Africa (CMU))

• Patrick BISENGA (PReV Rwanda Ltd)

• Prince (Rwanda Electric Motors (REM))

• Christian GAKWAYA (Rwanda Automobile Club)

• Nicholas HU, Rahman MABANO and Marumbo SICHINGA (Kabisa Electric Ltd)

• Roopak GORAJIA (Akagera Business Group (ABG))

• François ZIRIKANA (GIZ)

• David IDDUNUOLUWA (Bboxx Ltd)

• Janvier KABANAIYE (Rwanda Energy Group (REG))

• Emile KINUMA (Watu)

• Kevin MUCYO (Ampersand Rwanda Ltd)

• Ferdinand (Ox)

TABLE OF CONTENT

EXECUTIVE SUMMARY

INTRODUCTION

Methodology and case study definition

OVERVIEW OF THE CURRENT STATE OF EVs IN THE WORLD

1.1. Strong sales carried by BEVs

1.2. An unequal market

1.3. Two-wheelers

1.4. Second-hand EV market

REMAINING BARRIERS TO EV ADOPTION

2.1. Disparities within markets

2.2. Price and supply

2.3. Capabilities

2.4. Maintenance

2.5. Charging and power

2.6. Governance

STATE OF EV INCENTIVES IN THE WORLD

3.1. Typology of incentives

3.2. Unequal development of incentives

3.3. Targets of incentives

EFFECTIVENESS OF EV INCENTIVES

4.1. Incentives as the main element in EV policies

4.2. Lifetime and scale of incentive schemes

4.3. Impacts on the EV market

4.4. Ranking effectiveness

4.5. Who benefits

4.6. Public acceptance

4.7. A first step in EV market growth

POLICY TRANSFER

5.1. Definition of policy transfer

5.2. Rwanda: policy transfer at the national and corporate levels

5.3. China: limited opportunities for transferability

5.4. Transferability to other types of technologies

CONCLUSION

EXECUTIVE SUMMARY

The fight against climate change demands a revolution in transportation. While electric vehicles offer a promising path toward sustainable mobility, their adoption remains globally slow and uneven. This report investigates the effectiveness of incentives in overcoming the existing barriers to broader electric vehicle (EV) use.

The need for such research starts with the environmental imperative of dealing with a transportation sector that has a large, measurable negative impact on greenhouse gas (GHG) emissions today.

EVs, especially when powered by renewable energy sources, are a promising solution in reducing the sector’s overall emissions. However, despite recent growth and increased awareness about their environmental benefits, widespread EV adoption remains a challenge.

Governments and other actors around the world have tried to increase adoption through incentive schemes to make them more accessible and more atractive for road users. However, the question remains: what barriers remain to EV adoption? And are current EV incentives effective in overcoming these barriers to achieve affordability and sustainability?

Therefore, we delved into two contrasting examples of countries that have developed incentive schemes: China, a leader in EV adoption with well-honed incentive programmes, and Rwanda, a developing nation struggling with low car penetration but with strong ambitions for EV deployment. Our fieldwork findings reveal a nuanced picture. Incentives can be powerful, but their effectiveness depends on the type of

incentive and the specific market context. China’s success in encouraging larger shares of its population to adopt EVs underscores the importance of a comprehensive approach, where incentives target different aspects of the EV ecosystem. The country developed a mix of incentives that included purchase, charging, licensing, and usage incentives before progressively deciding to exit the programme.

In Rwanda, however, the high cost of EVs and low car penetration have limited the effectiveness of traditional incentive models. Despite their limited effectiveness for four-wheel electric vehicles, these incentive schemes have managed to spur the broader adoption of electric two-wheelers and to improve overall personal mobility affordability.

While generous and wide-reaching incentives are crucial to the initial growth and development of an EV market, they are often unsustainable in the long term. From the moment incentive schemes are implemented, exit strategies need to be considered. China’s experience tells us that once the market is mature enough, a safe exit is possible without negative repercussions on EV adoption. But for this to work, a holistic approach encompassing manufacturing, battery recycling, and consumer education is essential.

This report was commissioned and funded by the Fédération Internationale de l’Automobile (FIA) Mobility Policy Commission through the Urban School of Sciences Po. Its authors are current graduate students enrolled in the Governing the Large Metropolis (GLM) programme. This work is part of their Capstone project.

KEY FINDINGS

>>>

FROM OUR STUDY CASES

• Incentives are a good solution for developing a mature market but should be considered a short-term EV adoption strategy.

• Among the most common incentives worldwide are sales tax - often VATand import duty reductions. These programs are effective for countries without domestic production and who lack the financial capacity to invest heavily in the market.

• Most of these incentives are not intrinsically linked to electric vehicles and could be applied to other low—or zero-emission vehicle types.

• Anti-ICEV policies can be the most effective in organising the switch to EVs, but they are difficult to sell to road users. Taxing ICEVs, however, increases revenue to finance EV incentive schemes.

• Non-restrictive incentives that increase the benefits of using an EV as well as decrease ownership costs can also work well and be more widely accepted.

RWANDA >>>

• Rwanda sees EVs as a solution to oil dependency and a gate to globalisation. It also aims to advertise itself as a “proof of concept country” with an open market for e-mobility companies to invest in, and seeks to attract global events through the electric modernisation of its vehicle fleet.

• Incentives reducing import and sales costs are a reason firms settle in Rwanda. Firms try out their business model in the country before expanding into larger markets in Africa. The approach has proven successful for e-motorcycle companies.

• For new electric cars, current incentives structures have yet to bridge the gaps between the country’s existing car culture, the purchasing power of the general population, and the high overall cost of a new EV.

• The situation is slightly different for used hybrids, which can now be cheaper than used ICEVs.

• The electric transition is happening rapidly within the two-wheeler taxi fleet, thanks to micro- financing schemes and cheaper charging prices compared to fossil fuel. At the moment, the supply is not matching the high demand. However, the dependency of e-motorcycles on battery swap stations is not an issue for the taxi business model as all activity is concentrated in cities.

• The e-motorcycle system benefits from local maintenance knowledge as the first firm on the market, Ampersand, assembles on site. Maintenance is more challenging for the automobile sector.

CHINA >>>

• In China, the desire to promote EVs was driven by environmental concerns (notably high levels of air pollution), as well as an ambition to reduce national dependence on foreign oil and gain a competitive advantage within an emerging industry.

• The government did notstart with protectionist motives in mind or the idea of promoting Chinese brands for EVs through its incentive schemes. Instead, it incentivised all NEVs (New Energy Vehicles) and allowed market forces to determine which propulsion systems - Chinese or international brands and BEV, PHEV, or HEV - would prevail.

• Today, Chinese consumers are still prioritising Chinese brands when buying new EVs. They want to support domestic products, which they believe are cheaper and have better features and designs.

• Incentives in China are holistic and comprehensive, targeting manufacturers and consumers. Incentives exist across a number of different fronts different fronts: purchase, charging, usage, licensing, standards, and other kinds of incentives.

• Incentives were efficient in encouraging Chinese consumers to adopt EVs, and the country now has one of the highest market shares for EVs, which will be close to 40% of sales in 2023.

• Purchase incentives are not the most important type of incentives currently, as prices have already declined, but they were essential in kick-starting the market.

• Today’s sales are not solely dependent on incentives, as despite the end of the national subsidies in 2022, sales have continued to grow in China. This means that when the market is mature enough, it can continue growing without state incentives.

• However, abandoning subsidies is a drawback for wide adoption of EVs as low-income households cannot afford new EVs and turn to secondhand ICE vehicles.

• City-level incentives that i crease user convenience and decrease ownership costs, like licensing schemes, are the most important incentives for Chinese road users in large cities.

• For Chinese consumers, private charging capacity is more important than public charging stations.

• Brands in China, after being supported by state incentives, are now competing against each other in the marketplace. This competition is done through the development of their own purchase and charging incentives, the improvement of the cars’ features, including them

in a broader IOT system, and the deployment of a community-based strategy towards their customers. These incentives are effective in increasing choice for customers and decreasing prices.

• It would be challenging to recreate Chinese EV incentive policy in any other country in the world. China has a unique set of industrial strengths, and strong financial capacity for wide-ranging policies. However, some individual measures should easily be replicable elsewhere, including the non-financial convenience incentives.

INTRODUCTION >>>

Human activities are one of the most serious threats to the overall health and survival of the planet. The vast majority of our emissions come from road transport (approximately 77%).

Amongst these human activities, the transportation sector has emerged as the main source of GHG emissions, among which road transportation came to represent close to 77% of emissions in 2022 (IEA, 2023b). These high levels of emissions are mostly due to the utilisation of fossil fuels by vehicles with internal combustion engines (ICEV). Governments and policymakers have set GHG emission reductions targets to slow down the effects of climate change and limit its strong damages on all ecosystems (Mukherji et al., 2023).

There is thus a strong need to mitigate climate change through GHG reduction which is tightly linked to the possibility of moving away from emitting fossil fuels into renewable and sustainable energies to power our vehicles today. The search for decreased GHG emissions in the transportation sector must not come at the cost of personal mobility. Indeed, safe, personal, affordable mobility is crucial for fostering economic and social development.

The transportation sector significantly impacts economic prosperity, as efficient mobility of people and goods enhances market accessibility, employment opportunities, and investments.

High-quality transport infrastructure correlates with increased economic development, enabling regions to thrive. Since the post-World War II era, the availability of personal transportation has opened substantial economic opportunities, facilitated reliable deliveriesand supported industrial and commercial markets. Sustainable, affordable personal transportation

systems enhance economic efficiency, access to essential services, and overall societal well-being by connecting people to employment, healthcare, education, and leisure activities (FIA, 2023a).

Climate change mitigation in the realm of transportation thus, appears as a great opportunity to rethink personal mobility, considering both the rights of road users and the reduction of transportation’s impact on the environment. There are many different paths that can be considered in this search for an efficient and holistic approach to a low-emission transportation sector.

Figure 1: Key milestones in the history of electric

EVs, when powered with low-emission renewable energy are considered to have a large decarbonisation potential for road transport. As a result, they are one of the best options amongst low-GHG emission technologies to curb emissions in the transportation sector, both in developed and developing countries (IPCC, 2022).

EVs are indeed more energy-efficient and they produce zero tailpipe emissions, and thus allow for a reduction in air pollution and GHG emissions. It is estimated that EV sales should reach 75% to 95% of total passenger car sales by 2030, to meet the objective of the Paris Agreement of limiting global warming to 1.5 degree Celsius (Climate Action Tracker, 2020).

Amongst the different routes and solutions towards a zero-emission transportation sector, this report focuses specifically on electric vehicles. Nonetheless, given the focus of the report on incentives for broader adoption of a specific low-emission transportation technology,

our findings could also be applied for the deployment of other types of transportation technologies. While we now know about the environmental benefits of promoting EVs over fossil fuel-powered vehicles, the market has only recently started to grow.

Even though EVs were invented and used well before ICEVs, they did not prevail as the main technology for growing transportation fleets during the 20th century (Chen et al., 2020). As a result, personal vehicle markets had to wait until the late 1990s for new EV models to appear, including from Toyota, in the context of growing awareness of the potential risks and impacts of GHG emissions (IEA, 2024b).

Indeed, we are witnessing a continuous rise in the adoption of electric vehicles, largely steered by a limited number of early adopters. In the last ten years, the world’s stock of EVs - accounting for both BEVs and PHEVs - has been multiplied by 100 (Figure 2).

Even with this massive growth, we are still far from reaching 75% of sales in EVs worldwide, even amongst leading countries. Currently EV roll-out is very uneven, with a wide variety of developing and undeveloped markets. Moreover, in areas where EVs did grow inrecent years, it is widely reported that the market could plateau once the initial group of early adopters completes their transition if prices do not decrease enough and if infrastructure is not widely deployed (Campbell, 2024). If this came true, and if other types of low-emissions personal cars were also globally unavailable, it could potentially present a substantial barrier to a more sustainable personal automobility and wider GHG emission reductions. The challenge at hand now, is to identify and understand what is preventing or could prevent current non-electric car users from buying one. From this step, we can understand how to overcome some of these barriers to be able to have a more developed and flourishing market globally.

One of the main methods that has been implemented to promote these EVs to a broad range of road users has been the deployment of incentives policies. These policies can be developed at different levels of governance - supranational, national, or local - and target different parts of the population with the goal of stimulating sales of these new kinds of vehicles.

Incentives are indeed a prevalent method used among others by governments to motivate individuals to make certain choices or make specific actions, in different sectors. They are based on a cost or benefits system that punishes or

rewards certain behaviours depending on the intended objective (Langbroek et al., 2016).

The goal of this study is to look at what kind of incentive schemes can be put in place and how effective they are in overcoming existing barriers to broader EV adoption. This study is based on the FIA’s commitment to ensuring future mobility remains sustainable, affordable, safe, and accessible to all.

METHODOLOGY AND CASE STUDY DEFINITION

This research is based on both a global analysis of the EV market and incentives around the world, as well as a deeper dive into two relevant markets at different stages of advancement in terms of EV penetration, where we decided to do fieldwork to enquire about their specific EV policies and their local implications.

Figure 2.

Source: (IEA, 2024a)

RESEARCH METHODOLOGY >>>

In this study, we used a combined methodology which includes both qualitative methods and quantitative methods. Specifically, we used literature review, case studies, interviews, questionnaires, and data analysis. We collected information and materials from various resources, including academic journals, news reports, policy documents, and professional reports from different institutions.

With these enriched sources, we produced our own data and analysis. As the EV market differs around the world, we chose two key countries – China and Rwanda for case studies and fieldwork. Shanghai and Kigali were selected to be our destinations for deeper understanding of our study fields.

To gather consumer intentions regarding the purchase and use of electric vehicles, as well as their views on various incentive policies in Shanghai, we developed a survey. This survey was a combination of an online questionnaire and street interviews.

Our questionnaire was based on research from Peng and Bai (2023), following the similar types of EV incentives implemented in Shanghai. It contains five parts, including respondents’ car usage and purchase intention, opinions on EVs, experiences of using an electric vehicle, opinions on incentive policies, and basic personal information.

We conducted random sampling among individuals aged 18 and over residing in Shanghai. A total of 102 valid questionnaires were collected.

We also conducted several in-person street interviews with residents and EV dealers, which are mainly about China’s EV market and their opinions on policies.

Our fieldwork in Rwanda consisted mostly of meetings and interviews with key stakeholders from academic institutions, government agencies, private sector companies, and non-governmental organisations.

CHINA: ADVANCED MARKET FOR EVS >>>

We have chosen China as the advanced market case study for several compelling reasons. China has emerged as a global leader in electric vehicles in recent years. Indeed, it has one of the highest shares of EVs in annual new car sales, and consistently sells more EVs annually than any other country worldwide.

This remarkable growth is attributable to an extensive array of financial and non-financial incentives implemented to foster the adoption of electric vehicles within the nation.

In China, a multitude of incentives at the national level play a pivotal role in driving EV adoption. These include strong anti-ICEV policies, substantial manufacturing incentives aimed at lowering prices and fostering the growth of domestic EV brands, tax exemptions and reductions for New Energy Vehicles as well as the establishment of an extensive and high-quality charging infrastructure.

On top of that, what particularly intrigues us about China is the significant emphasis placed on local-level policies enacted by provincial and municipal governments. These local authorities actively promote EVs by implementing innovative non-financial incentives to encourage local adoption further. China is also a noteworthy case study, as it is set apart by the current transition.

It is operating away from incentive-driven policies towards a greater reliance on market mechanisms and international trade. It will be very interesting for us to try to understand the motivations behind this transition and to look at the rich experience China has accumulated in this domain. With a diverse array of incentive policies implemented since the introduction of the national EV promotion project in 2012, we have learnt lessons from their successes and failures.

We have also observed a notable trend: many countries in the Global South are taking China’s incentive policies as a model to cultivate their own local EV markets and incentives.

By looking at the factors contributing to the success or failure of incentive policies in China, we wanted to see how these strategies could also work in these other markets.

RWANDA: AN EMERGING EV

MARKET

For our study on emerging markets, we have chosen to focus on Rwanda. Overall, the African market for EVs remains very limited today, with a low motorised vehicle penetration and many African countries relying on imported second-hand cars. However, Africa is currently experiencing rapid development, ranking second globally in terms of potential market size, and has become a place where the question of access to automobiles is increasingly pertinent. In the context of our study on incentives for EVs, the challenge in Africa lies in promoting the electric path over the ICE one in markets where neither has fully matured, with the advantage that the R&D on EVs is already well advanced.

Despite its small size and low per-capita GDP, Rwanda has experienced significant growth in the e-mobility market in recent years. The nation has made substantial investments in infrastructure, positioning itself as a leader in Africa. Notably, Rwanda has emerged as the first African country to implement comprehensive EV policies since 2021, showcasing a multifaceted approach that encompasses financial incentives and innovative urban planning solutions.

Rwanda has also become attractive to foreign investment and has been introducing EVs from various international

manufacturers such as Volkswagen and BYD. The Chinese EV industry growth has created interesting opportunities for markets of the developing world.

This report will mostly focus on incentives directed towards plug-in electric vehicles (BEVs and PHEVs). However, depending on the country, there could be variations in the incentive schemes’ inclusion or exclusion of other types of vehicles. In China, one of our main case studies, all NEVs were included in the national incentive scheme, including BEVs, PHEVs, and FCEVs. In Rwanda, incentives that cover hybrid vehicles do not differentiate between PHEVs or HEVs, and as a result, both will be included in our analysis of the Rwandan car market.

Field research into the two-wheeler market in Rwanda also revealed its essential structural place in the mobility ecosystem and the efforts made towards electrification. In Rwanda, like in many other developing countries around the world, two-wheelers account for a large portion of the domestic vehicle market. 1(NEV

OVERVIEW OF THE CURENT STATE OF EVs IN THE WORLD

Building on the initial question raised in the executive summary —how effective incentives are at driving electric vehicle adoption— we quickly recognised the need for a deeper understanding of the current EV landscape. Just as a farmer needs to assess the soil before sowing seeds, we understood that we needed to analyse the existing market conditions to fully grasp where incentive policies take root and how this might influence EV growth. This first part of our report delves into the “where’’ and “who” of the current EV market. We’ll examine the types of electric vehicles being sold, the geographic distribution of sales, and the key players driving the market forward. By establishing this baseline, we can later explore how incentive programmes interact with these existing dynamics, ultimately revealing how this can influence incentive strategies and their effectiveness.

1.1. STRONG SALES

CARRIED BY BEVS

In 2024, projections from the International Energy Agency (IEA) anticipate that over 20% of cars sold globally will be electric vehicles, a considerable increase from their 2% market share in 2018 (IEA, 2024b). This surge is attributable to a substantial rise in demand for EVs. Prior to this, annual sales plateaued at around two to three million vehicles.

PHEVs often get confused with simple hybrid electric vehicles (HEVs), which are not pluggable for recharge. HEVs represent a similar market share to PHEVs globally, with 4.2 million sales in 2023 compared to 4.3 million for PHEVs (Normand, 2024).

Hybrids dominate the domestic market in Japan — a leading automobile exporter — though BEV sales have been accelerating recently (Take, 2024).

What is driving plug-in electric vehicle sales today are primarily Battery Electric Vehicles (BEVs), also known as ‘pure EVs.’ BEVs are fully electric vehicles powered by a battery pack that stores electrical energy for the electric motor. These batteries are charged by plugging into an electric power source. Although the electricity source can impact over all emissions, BEVs are considered zero-emission vehicles as they produce no direct exhaust or tailpipe emissions. These EVs represent around 70% of annual plug-in EV sales (Figure 4).

The remaining 30% of the market consists of Plug-in Hybrid Electric Vehicles (PHEVs), which utilise both an internal combustion engine and an electric motor powered by batteries. PHEVs’ batteries can be charged via a wall outlet, charging equipment, the ICE, or regenerative braking. Typically, PHEVs run on electric power until the battery is nearly depleted, then switch to the ICE. They can operate in hybrid mode (using both electricity and fuel) or all electric mode (using only the electric motor). PHEVs can travel at high speeds and longer distances on electric power alone, and the ICE can recharge the battery if necessary (FIA, 2023a).

However, HEVs are more popular than plug-in EVs in many countries, as they are closer to ICEVs and tend to be favored by customers not yet ready to adopt charging technology. Data from developing countries, especially in Latin America, show that HEVs are still prioritised over plug-in EVs. For instance, HEVs accounted for more than 73% of hybrid and electric car sales in Mexico in 2023, while BEVs and PHEVs made up only 27% (Salvalaggio, 2024). This percentage rises to 88% in Peru and 94% in Argentina (Tus Noticias, 2024). In Europe, HEVs are also more popular than plug-in EVs in countries like France, where they represented 37% of all vehicle registrations in the first two months of 2024, compared to 17% for plug-in EVs (Normand, 2024).

In Rwanda, the market is divided between automobiles and motorcycle. In the car segment, hybrids dominate sales, with BEVs present but on a much smaller scale, ten to one compared to hybrids, due to their higher price being a barrier to adoption.

Despite their significance in many parts of the world, the overall global share of HEVs is diminished by very low sales in China—less than one million units sold in 2023—compared to 8.1 million plug-in EVs sold in the country that year. Among these, BEVs are the preferred type of plug-in EV, representing 5.4 million of the 2023 sales and accounting for two-thirds of the plug-in EV market (IEA, 2024b).

Figure 3.

Source: (IEA, 2024a)

Figure 4.

Source: (IEA, 2024a)

1.2. AN UNEQUAL MARKET >>>

Looking more closely at data, with the share of EV total sales in 2023, there are strong disparities across countries. Car markets with the highest share of EVs among new car sales are primarily concentrated in China and Europe, followed by East Asia, North America, and Oceania. Even if we see some emerging markets in Latin America and Southeast Asia, which have experienced high growth in recent years and have higher market shares for EVs than other developing countries, we see that three main regions account for most of the EV market: Europe, the United States, and China. These three regions account for 93% of all plug- in EV sales in the world (Figure 5).

HOW ARE THE MARKETS LOOKING IN THESE THREE MAIN REGIONS?

CHINA

China today accounts for nearly half of all EV sales globally and is considered the world leader in the EV market. In 2023, EVs made up almost 40% of all car sales in China, marking a 2.2-million-unit increase compared to 2022 (IEA, 2024a). The IEA projects this share will rise to around 70% by 2030 and 85% by 2035. In major cities like Shanghai, one of our focal points for this report, NEV registrations already exceed 50% (P. Zhang, 2023). Our survey corroborates this, with 53% of 102 respondents to our survey owning either a BEV or a PHEV.

The most popular car brands in China are predominantly Chinese. Examining December 2023 EV sales in China reveals that 18 of the top 20 best-selling models are from seven Chinese brands. BYD, a Shenzhen-based company, leads the market. In 2023, BYD had eight models in the top 20 best-selling cars and accounted for 53% of sales within this top 20 (Figure 6).

Compared to national PHEV sales, BYD sells higher volumes of plug-in hybrids, which represented 48% of sales of their eight most popular models in 2023.

Figure 5.

Source: (IEA, 2024a)

Figure 6.

Source: (Pontes, 2024a).

This may be because fewer PHEV models concentrate sales on a few models, propelling them higher on the best-seller list, and because PHEVs are cheaper than BEVs. For instance, the BYD Song, the most popular EV model in China last year, is priced at 109,800 RMB— approximately 14,259 EUR—for the PHEV version, while the BEV version starts at 189,800 RMB—24,649 EUR (BYD, 2024). There is only one non-Chinese manufacturer on the most popular brand list in China - Tesla. Tesla is the second most popular brand, but has a significantly lower market share of 13%.

This supports our research in Shanghai, where BYD emerged as the predominant EV brand among our respondents, with 40% ownership, while Tesla followed with close to 30%. In the ‘others’ category, EV owners possessed vehicles from AITO, and Hozon, confirming that Chinese brands are the preferred choice for EVs in Shanghai and across China. Additionally, when respondents who did not yet have an EV were asked about the brand, they were most likely to purchase for their next EV, the results were consistent, with Chinese brands such as BYD, Nio, and XPeng being the most popular choices.

However, only 3% of respondents said they would consider Tesla for their first EV purchase. This disparity might be attributed to the growing popularity of Chinese EV brands, which have gained a favorable reputation in market.

When respondents were questioned about their preference for Chinese brands over international brands like Hyundai or Mercedes-Benz, which were not selected as potential choices, the most frequent reasons cited were the innovative designs and attractive appearance of Chinese models — 69% of respondents —their affordability and cost-effectiveness— close to 62% of respondents — and a desire to support domestic products— 62% of respondents.

Figure 7.

Source: authors.

Figure 8.

Source: authors

It is the emergence of these strong Chinese EV brands that has enabled China to establish itself as a dominant player in the EV sector. China has indeed become the leading producer and exporter of EVs globally. In 2022, BYD was the top EV brand worldwide, commanding a 22% market share of the plug-in EV market, significantly outpacing its main competitor, Tesla, which held a 13% market share (Pontes, 2024b). Although most of BYD’s sales occur within China, BYD has significantly increased its exports, more than tripling them in 2023 compared to the previous year, with over 240,000 cars exported (Carey et al., 2024). Similarly, other Chinese brands are also expanding beyond the domestic market, primarily targeting developing markets. For instance, in 2023, the leading importers of BYD cars were Brazil and Thailand, with 18,000 and 30,000 imported cars, respectively (Pontes, 2024a).

China’s emergence as a pivotal player in the global EV market is also due to its unparalleled production capacity for cars, components and batteries. In 2023, China was the largest producer of NEVs, manufacturing 9.5 million units, which accounted for nearly 65% of global production that year (Li, 2024).

Furthermore, China produces 57% of the world’s batteries, primarily through market leaders CATL and BYD (Figure 10). These brands not only supply batteries for Chinese EV models but also for other brands manufacturing their models in China or elsewhere, such as the Tesla Model Y or the Toyota bZ3 produced in Germany (Venditti, 2024).

However, if we examine the origins of the essential materials required for manufacturing batteries, we uncover a far more extensive network of actors beyond China. Although China possesses some of the necessary rare earth materials domestically, it relies heavily on a variety of materials sourced from different regions worldwide. Many of these materials come from the African subcontinent (FIA, 2023b).

Figure 9.

Source:(Pontes, 2024b).

Figure 10.

Source:(Pontes, 2024b).

EUROPE

Europe today stands as the one of the regions with the most developed EV market and infrastructure globally. Leading countries such as Norway, Iceland, and Finland have EV sales exceeding 50% market share, and reaching up to 90% (IEA, 2024a).

This advancement is driven by the European Union’s commitment to promoting the transition from ICEVs to EVs, as part of their “Fit for 55” package.

This package comprises a series of objectives and proposals for updating EU regulations to achieve the European Union’s goal of reducing GHG emissions by 55% by 2030 (Council of the European Union, 2024).

In 2023, EVs accounted for 21% of total car sales in Europe, a significant increase from just 10% of sales three years earlier (IEA, 2024a).

However, there are substantial disparities in EV adoption rates across different countries within the region, highlighting a varied landscape of progress.

The most advanced country in terms of EV adoption in Europe is Norway. The country has been actively promoting EV adoption since the 1990s, with a significant increase in efforts during the 2010s through strong incentive policies implemented by the Norwegian government. EV sales surged around 2013, accelerating much faster than in any other country (Jaeger, 2023).

Consequently, Norway has surpassed the 75% sales objective and, in 2023

exhibited the highest share of EVs in total car sales, with EVs comprising over 91% of the market and BEVs accounting for 90% of these EV sales (European Alternative Fuels Observatory, 2024b).

Today in Europe, the most popular EV models are from Tesla, followed closely by electric models from traditional European ICEV manufacturers. These manufacturers have transitioned to producing EVs in response to EU restrictions on fossil fuel motors. Among the top-selling models are those from Peugeot, Volvo, and Skoda (Figure 12).

Figure 12.

Source: (European Alternative Fuels Observatory, 2024a)

Figure 11.

Source : (OEC, 2021; FIA, 2023b)

However, despite Europe being the second-largest player in terms of EV sales and production, following China, EV adoption has not progressed as rapidly as anticipated, especially considering the ecological tradition in certain European countries.

In Germany, for instance, there is a fixed target of reaching 15 million registered EVs in the passenger fleet by 2030. However, this target appears challenging to achieve given current trends, where sales are described as ‘sluggish’ and ‘stalling.’ There has been a decline in the percentage of new EV registrations (over total registrations) from 16% in March 2023 to 12% in March 2024 (ADAC, 2024). According to Dr. Monica Berg and Alexander Toop from ADAC (Personal Communication, April 26, 2024), with whom we had the opportunity to discuss this issue, the slower-than-expected development can be attributed to several factors.

These factors include the comparatively high price of EVs available on the German market, the comparatively low resale value of used EVs, the lack of smaller and affordable EV models, as well as the very abrupt end of Germany’s national incentive schemes for EVs, which has shaken consumer confidence in electromobility. In addition, there is the economic importance of the automotive industry in Germany and across Europe. They explained that the competitive advantage of European car manufacturers, particularly German brands, in the quality of ICE cars is now being challenged by alternative propulsion technologies, especially new EV technologies.

Europe is not only experiencing a change in technology, but also an enormous transformation process for one of Europe’s most important industries, with many thousand jobs at stake.

UNITED STATES

The United States accounted for 13% of global EV sales in 2023, putting it behind China and Europe in terms of EV market share. Only 10% of cars in the US this year were EVs, with Battery Electric Vehicles (BEVs) dominating nearly 75% of the EV market in the country (IEA, 2024a). Tesla remains the leading player within these BEV sales, commanding close to 60% of all EV sales in the US in 2023, significantly ahead of other American brands like Ford and Chevrolet (Shahan, 2024). Notably, in contrast to other markets, Chinese brands do not appear in the American rankings for the best-selling EVs in the country.

Figure 13: Market shares of different brands on the BEV segment in the US. The first four main brands are Americans, others are brands with over 1% market shares are either German, Korean or Japanese. Chinese cars do not have prevalence in the US. The market is largely dominated by Tesla, all other brands have less than a 10% market share.

Source: (Shahan, 2024)

The popularity of Tesla in the US and its presence as a major player in the EV sector can be attributed to its position as the first EV brand to achieve global prominence. Tesla was the leading EV manufacturer worldwide for many years before the emergence of BYD as a significant global competitor. Even in China, where local manufacturers dominate, Tesla remains the second most popular brand, although its influence is declining there. When considering only BEVs, Tesla continues to hold the leading position globally, with a 19.1% market share compared to BYD’s 16.5% (Pontes, 2024b).

REST OF THE WORLD

In regions outside of China, Europe, and the United States, EV development remains significantly limited. This is particularly evident in Africa and the Middle East, where EVs make up less than 1% of total car sales (IEA, 2024b). However, some countries in Asia and Latin America are experiencing rapid growth in adoption, despite the low global levels. Nations such as India, Thailand, and Malaysia have seen substantial increases in EV sales, with a 70% rise in EV registrations in 2023 compared to 2022.

Brazil and Thailand have achieved market shares of 3% and 10% for EVs, respectively, while Malaysia tripled its registrations last year (IEA, 2024b). In many of these

countries, the surge in sales is largely driven by the significant presence of Chinese EVs. Despite their higher prices outside the Chinese market, Chinese EVs remain more affordable than other imported vehicles in these regions, where local EV production is limited or nonexistent (Carey et al., 2024).

Efforts are underway to bolster the development of the local electric vehicle sector in certain regions through industrial policies and local EV production. For example, Thailand has taken steps in this direction by establishing an EV production plant in the country in collaboration with BYD, set to commence operations by the end of 2024 (P. Zhang, 2024). Similar-

ly, Indonesia is actively seeking to attract Tesla to establish a factory in Jakarta, highlighting the accessibility of local nickel mines crucial for EV battery manufacturing (Onthaworn, 2022).

Other countries are also supporting the growth of their domestic brands locally and internationally. This is the case for Vietnam and their EV brand Vinfast (already present in the US and Europe) and with India, which is developing its own models locally (Attri, 2024).

There is an opportunity for developing regions, notably Africa, to promote the EV market in place of ICEVs (which is still not a developed market). A low car penetration might be turned from a limitation to an opportunity for the EV industry.

In Rwanda, where the car penetration rate is 10 per 1,000 residents, the government has introduced a policy framework to support the emergence of an EV market. The targets announced by the government for 2030 are ambitious: 30% of the total motorcycle fleet should be electric, as well as 8% of the car fleet, 20% of buses and 25% of moto-taxis (MININFRA, 2021). The focus on moto-taxis is interesting as they are, especially in Kigali, the main and most convenient mode of transportation for the biggest part of the population.

Beyond the sales, the Rwandan policies serve to develop economic activity in the country. The openness of the government and the incentives have attracted

companies to settle in Rwanda. On the car side, parallel market car dealerships have specialized in electric automobile sales in addition to established licensed dealerships. On the motorcycle side, four main companies import (and assemble, for some) and sell two-wheelers that rely on battery-swap technology. They also build and operate stations where they can swap those batteries.

Another sector playing a major role is the financing sector. Today, most two-wheelers in Rwanda are purchased through micro-financing schemes. Most of the two-wheelers sold in Rwanda today are done so thanks to micro-financing schemes making the vehicles affordable for the taxi drivers.

Small emerging markets like Rwanda are turning towards China to develop their domestic sales. China is interesting for importer countries, because of its low prices and the speed at which vehicles and parts can be shipped.

The fact that China is driving on the right side of the road is also a small but interesting detail to consider for countries that do as well, as it means that mass-produced Chinese models can also be used in their region. In Rwanda, we have seen many cases of vehicles inscribed with Chinese characters.

1.3. TWO-WHEELERS

The rest of the world might also be underrepresented in the EV car sales because certain regions like Africa or South and Southeast Asia have lower rates of car penetration. In these regions, other forms of e-mobilities have emerged (or are yet to emerge) such as e-motorcycles, even if their uptake has been slowed by difficulties in the supply chain in China following COVID restrictions in 2022 (Figure 14). Electric two-wheelers are common on the streets of cities like Shanghai alongside electric cars.

China has been and remains the biggest market for electric two-wheelers today, despite the decline of the past two years.

Other countries - particularly those in Asia - have gained a bigger market share in recent years. Interestingly, the market of electric two-wheelers in India and Vietnam has been able to grow due to the domination of models from national manufacturers, which represented 75% of sales of electric two wheelers in India in 2023 according to the IEA (IEA, 2024b).

Other countries - particularly those in Asiahave gained a bigger market share in recent years. Interestingly, the market of electric two-wheelers in India and Vietnam has been able to grow due to the domination of models from national manufacturers, which represented 75% of sales of electric two wheelers in India in 2023 according to the IEA (IEA, 2024b).

The IEA does not provide any data for Africa, but from our field work and discussions in Rwanda we have learned that about half of the vehicles on the road in Rwanda are motorcycles, roughly 100,000. In Kigali alone, more than 20,000 of them are operated as taxis.

This organisation of the market is what is allowing the fast development of the battery-swap ecosystem. A report from the FIA Foundation, The Wheels of Change (FIA Foundation, 2022), explores the safety and sustainability of the motorcycle market in Sub- Saharan Africa, and is a good complementary report on the place of two-wheelers in the future of mobility. We find motorcycles to represent a large part of the vehicle market in developing countries where the purchasing power of the populations and the urban layout does not favor the more expensive automobile option. It would ignore the role of e-motorcycles in the wider journey towards affordable and sustainable mobility for all.

Figure 14.

Over representation of China in electric two-wheelers sales, where electric two-wheelers represented 35% of the two-wheeler mar- ket in 2023, but new markets are emerging notably India and Vietnam. Source:(IEA, 2024b; M.C.D. Team, 2024)

1.4. SECONDHAND EV MARKET

Today, the secondhand market for EVs is far from developed. This is an opposite trend to what we have seen with ICEV cars, where most exchanges in areas like Europe are being done on the second-hand market, notably in times of economic crises. In markets in developing countries, such as Rwanda, the imported secondhand market is almost the only source of cars, as only a very small elite can afford new cars.

This strong reliance on the secondhand market can also explain the slow adoption rates of EVs in areas with very strong secondhand markets for cars, like in France where 75% of passenger cars sales happened in the secondhand market in 2023 (French Ministry of Ecological Transition and Territorial Cohesion, 2024).

Dr. Monica Berg (M. Berg & A. Toop, personal communication, April 26, 2024) explained to us that the secondhand EV market was slacking, not because of the price, as these are relatively low on the secondhand market, but because of the quality of the vehicles on it. Technology in terms of EVs has developed very fast in the past few years and models being put on the secondhand market are thus considered obsolete by buyers. Moreover, as most EVs currently on the roads were newly bought in the past four years given the uptake of EV sales in 2020,

there are far fewer modern models available on the secondhand market, asc compared to secondhand ICE models. Indeed, we had a similar observation in Shanghai, where none of our respondents had bought their EV on the second- hand market. Most respondents had bought their new EVs recently, between 2020 and 2023.

However, the secondhand market in China remains relatively important, with 14.8 million passenger cars sold on it in 2023 (Shandong IT Home, 2024), including 800,000 electric vehicles (IEA, 2024b). This represents just 5% of the secondhand market, compared to EV’s 40% market share for new car purchases.

This is even more true in the countries of the developing world that rely exclusively on an importation market for automobiles. In Rwanda, like in many other countries where the average income falls far behind the global average, the purchase of new cars is the luxury of a small elite, and the majority of the vehicle fleet is made up of secondhand cars from the global north.

KEY TAKEAWAYS

• EV growth has really taken off since 2020, carried by sales in China, Europe, and the United States.

• Battery Electric Vehicles are the leading type of electric vehicle sold globally, making up 70% of annual sales.

• China is the world leader in the EV market, accounting for nearly half of all global EV sales in 2023. They also dominate the manufacturing sectors for cars and batteries.

• Chinese brands dominate the EV market in China. Tesla remains the most popular brand in Europe, followed by electric models from traditional European manufacturers.

• While some developing countries have started experiencing rapid EV growth in the past couple of years, they remain far behind the three main regions.

• Europe boasts the most developed infrastructure, while the US grapples with slower-than-anticipated adoption.

• In developing countries, twowheelers can represent a large portion of the vehicle stock. Their transition to electric models is also essential to pursue environmental objectives and address air and noise pollution in large cities.

• There is a great potential for EV market growth in developing countries as the overall vehicle market expands. In Rwanda, it grows 12% every year.

• The secondhand market for EVs is still limited, especially in Europe, due to limited stock, concerns about battery range and the rapid evolution of EV technology that renders older models obsolete in the eyes of consumers.

REMAINING BARRIERS TO EV ADOPTION

The analysis in the first part painted the picture of the burgeoning electric vehicle market, highlighting the dominance of China, the growing importance of two- wheeler electrification, and the disparities in adoption across regions.

While this progress is undeniable, there remain significant barriers to the widespread adoption of EVs. As such, the next part of this report considers the nature of these barriers, and the differences between these barriers in our two different case studies.

2.1. DISPARITIES WITHIN MARKETS >>>

Disparities in terms of EV adoption are present not only across countries and regions but also within single markets.

There are very strong disparities, for example, between urban and rural areas. Cities are driving the EV transition globally, while rural areas are still facing difficulties in properly developing a strong EV market.

If we look again at our Chinese case study, we notice very strong territorial differences between provinces and even across cities. Some rich and urbanised provinces like Beijing, Shanghai, and Guangdong have higher shares of EV sales than the other Chinese provinces, along with very good charging networks, especially for Beijing and Shanghai.

Other, poorer provinces like Jilin or Heilongjiang, in the Northeastern part of China, and more rural areas like Yunnan, in the Southwest are considered to be ‘laggards’ in terms of EV adoption (Shao & Mišic, 2023).

Even within affluent urban areas, there can be disparities. Indeed, we have noticed that there can be a difference in EV adoption between ‘early adopters’ who have already made their switch from ICEV to EV and people who have not yet bought an EV.

We thus wanted to know more about the typology of people who can be considered as part of these ‘early adopters.’ From our data in Shanghai through the answers of our 55 respondents who already owned an EV, we can draw a profile of EV buyers in the city. These buyers are predominantly in their thirties, with a balanced gender distribution. They are highly educated, with an overwhelming majority holding a college degree. Most are married with children.

Financially, they tend to have middle to high incomes, spanning a wide range but skewing towards the upper- middle bracket, living exclusively in urban, for the most part, or suburban areas. Additionally, a significant majority are employed in the private sector. This is coherent with other studies on early EV adopters, including that carried out by Sovacool and his colleague carried on a sample of over 5,000 EV owners in the Nordic Countries (Sovacool et al., 2019), made on who are these early adopters outside of China.

In Rwanda, the profile of early adopters of EVs however, is quite different. As the price of EVs is too high for the vast majority of the population, only a small proportion of the population would be able to afford electric cars. The elite tend to consider cars as status symbols - and thus prefer larger, more imposing designs. As such, the ‘affordable EV’ look and style is less popular in-market.

Affordable EVs do not match what they look for in cars. The few electric cars that are bought by individuals are the most expensive and biggest available to purchase. Therefore, there is a potential for the large electric pick-up segment to find a bigger market in Rwanda. A big part of the EV sales in Rwanda today are made by large corporate firms and NGOs, who turn to EVs because of their company policies rather than incentivising policies.

E-motorcycles are almost exclusively used by two-wheeler taxi drivers. Other users may also be interested in these vehicles, but taxi drivers represent ideal clients for vendors, as they are likely to continue using vendors’ charging businesses over time.

Taxi drivers who want to purchase an electric two-wheeler must also join long waiting lists, whose demand significantly outpaces production capacity. The fact that e-bike companies cannot grow as fast as demand is one barrier to the development of the market.

These companies have told us that they lack the funding to do so. Today, there are large parts of the population, both

in countries with a very small EV market and in more developed markets like China, that remain completely out of the EV market. This is why we will now be looking at the remaining barriers that there are to a wider EV adoption in the world.

In the capital, the preferred mode of travel is the taxi motorcycle, where a trip usually costs 500 RWF to 2,000 RWF—0.5 EUR to 2 EUR. An estimated twenty thousand motorcycles use Kigali’s streets daily.

In the countryside, we have witnessed many people walking and riding bicycles as the farmers commute to the market towns. The bicycles are used to transport merchandise.

There is a duality in the way of life in Rwanda between those with vehicles and those without. If owning a car seems to be reserved for an elite portion of the population today, tomorrow’s market may cater towards the emergin urban middle class, looking to access affordable cars. In 2021, the Ministry of Infrastructure (MININFRA) stated that the vehicle stock in the country was growing 12% a year.

The EV transition in Rwanda is happening almost exclusively in Kigali, the capital.

Yet, even there, cars are only considered as a reasonable means of transportation for some of the population, as used ICEVs are already considered too expensive.

The urban layout also does not allow the use of large vehicles everywhere, as many of the residential areas are made of narrow and steep alleyways. (Photo 5). For a population of thirteen million, it is estimated that there are 260,000 vehicles on the roads (counting motorcycles), making Rwandan car penetration 20 cars per 1,000 inhabitants.

Figure 16.

Source: (Our World In Data, 2024; World Health Organization, 2024; United Nations, 2022)

2.2. PRICE AND SUPPLY >>>

The main barrier to EV adoption today remains the price. Electric vehicles have been, for comparable models, more expensive to produce than their ICE counterparts, mainly due to the cost of the batteries that power them (Miller, 2020) (figure 17), even if the battery prices have been constantly decreasing in recent years (Carey et al., 2024).

As a result, very few entry-level EV models are priced below 20,000 EUR in Europe and the United States.

This can be compared to ICEV sales in France, where vehicles with the 10,000 EUR and 20,000 EUR price range account for close to 10% of new cars on the market.

Looking at Figure 18, we notice that in France, EVs tend to be more represented than ICEVs in the most expensive price brackets, as almost 70% of new EVs were sold over 40,000 EUR when it is only 35% of ICEVs that are sold in that range (Jato, 2019).

The price gap between electric vehicles and internal combustion engine vehicles is less significant in China due to mass production and substantial public investment, which have led to the development of cheaper EV models competitive with comparable ICEVs.

In 2019, the most popular EV types in China, compact cars and SUVs had average prices much lower than those in other parts of the world. They also projected that by 2025, EV prices in China will be low enough to become cheaper than traditional ICEVs, even without incentives.

As a developed EV market with various domestic manufacturers, China has established a comprehensive industry for the production and maintenance of EVs.

Figure 17.

The cost of the battery (in green) is the main factor that makes EV more expensive to produce.

Source: (Olivier Wyman, IEA, 2020)

Figure 18. Comparison between the prices of newly bought EV and ICEV in France in 2019.

Source: (Jato, 2019)

Currently, the price and quality of EVs in China are comparable to ICEVs, with some models even surpassing them in cost-effectiveness.

Consequently, prices are not considered a barrier to EV adoption in China, and this was visible in our questionnaire; when we asked about respondents’ impressions of EVs, only 16 out of 102 of them answered that they considered EVs “expensive.” This was also the case among the 33 ICEV owners we surveyed, with only four of them saying that the reason they did not have an EV is because they are expensive.

While China is currently unique in this regard, other countries are expected to catch up. For instance, it is estimated that by 2027, it will be cheaper to produce battery electric vehicles than traditional ICEVs in Europe (Reuters, 2024).

For comparison sake, if we look at the number of BEV models available below this 40,000 EUR threshold in 2023, there were 181 available models in China below that price, meaning roughly 80% of all models.

In Europe, there were only 31 models, representing only 23% of all models while in the US, only 9 models cost less than 40,000 EUR, accounting for a mere 18% of all BEVs in the market (Munoz, 2023).

For example, for larger-size EVs, it is estimated in 2021 that the total cost of ownership in France will become cheaper than the cost of gasoline-powered gas cars after three years and cheaper than for diesel cars after four (Figure 21. Piot, 2021). However, since most people prioritise upfront costs when buying a car, these long-term savings on fuel might not be the main reason someone chooses an EV and may not make the initial price less of a barrier for most people.

In Rwanda however, and in developing nations, the market of new cars is very limited, and most of the cars on the road are secondhand ICEVs, mainly from Europe and Japan. In the coming decades, as the EV transition continues in the Global North, it is likely that the global stock of EVs will trickle down towards secondhand import markets.

The lack of diversity in EV models compared to ICEV models both in design and pricing can also be disadvantageous, but the rapid development of the industry and the multiplication of actors, especially in China, has been filling that lack quickly. Because of the 2035 EU ban on new ICE sales, European manufacturers have been transitioning their offerings, and many models exist now only in their electric versions (Le Monde & AFP, 2024).

It is interesting to note, however, that concerns over lack of model diversity does not translate into the motorcycle market. Each brand present in Rwanda has one model with a unique price. Motorcycles also have the specificity of having a shorter lifespan than cars, which means they need to be changed more frequently. This has allowed e-motorcycles to gain market share quickly in Kigali.

Electric vehicles can actually be more economical in the long run, even though they typically cost more upfront. This is because charging an EV is cheaper than filling up a gas-powered car for the same distance. The advantage of cheaper electricity takes time to outweigh the higher initial price of the EV.

Figure 19.

Evolution of the price of a compact and sports car in China between 2020 and 2035

Source: (Lutsey, 2021)

Figure 20.

Total number of BEV models that cost more and less than $40,000 in China, Europe and the United States Source: (Munoz, 2023).

Figure 21. Source: (Piot, 2021)

2.3. CAPABILITIES

Many potential buyers of EVs still do not take the leap because they are not convinced by EV technology. The battery range of EVs is a criticism that is often cited. In practicality, for most daily uses, a driver would never empty the car’s battery, and the possibility of charging at home or at the workplace makes the EV very attractive for urban use.

However, the charging time, shorter range between charges, and a relative lack of public chargers compare to gas stations are factors that make EVs impractical and inconvenient in the eyes of many consumers. This so-called “range anxiety” is a challenge because a greater range implies a higher cost of production and a greater environmental impact, and it is hard to know what range milestone would be enough to convince the most reluctant consumer.

Reliability and durability are also important limits to EV adoption. Battery technology is still new and rapidly evolving, and we observe a rising implementation of software ecosystems and digital tools in the driving experience. These elements can cause the car to malfunction more frequently, and their repair becomes more difficult as the technologies used become more complex.

Globally, the power battery is one of the core components of electric vehicles and the most expensive component, accounting for 40% to 60% of the vehicle’s cost.

Due to technical limitations, the battery life is between 6 and 8 years, and the performance gradually declines with use.

The cost of repairing and replacing electric vehicles is very high. For example—in China—a pure electric vehicle of a joint venture brand is priced at 209,900 CNY (27,618 EUR), and the price of replacing the battery is 140,000 CNY (18,421 EUR) (X. Wang, 2024). Concerns about the service life of electric vehicles are one of the main reasons that consumers decide not to buy an electric vehicle.

Even with a high share of EVs in sales, the anxiety persists, as we have seen in our Shanghai survey as 80% of our respondents signaled the short battery range and mileage as an inconvenience for owning an electric car.

The problem of battery life also affects the second- hand electric vehicle market. After three years of use, the residual value of BEVs is around 30%, while ICEVs generally

maintain 60 to 70% of their initial market price (X. Wang, 2024).

Retired electric vehicles in China rarely enter the second-hand car market but are disassembled and recycled. Most consumers prefer to buy a new electric vehicle instead of a used one.

Education on electric vehicle capacity needs to be done, and given rapid technological developments in the EV sector, it needs to occur in a continuous cycle.

While “range anxiety” might have been justified a decade ago, today’s models enjoy a significant range, regardless of their price point.

In countries where the EV market is still young, the average buyer may be unaware of its existence or may not have access to information about EVs. The unwillingness to buy an EV can also be motivated by the belief that electric engines are not the best alternative to combustion engines.

2.4. MAINTENANCE

Cars remain in operation for many years, and when a component fails, access to repair expertise and capacity is essential. This need is particularly pronounced for electric vehicles (EVs), given the perception of their technology as more intricate and potentially less durable if relying on imported used components.

However, a study by the University of Michigan suggests that in most major American cities, the costs associated with repairing and maintaining an EV throughout its lifespan should be lower than ICEVs (Woody et al., 2024). Furthermore, the International Council on

Clean Transportation has examined the total ownership costs of EVs over their lifetime, considering factors such as vehicle type (BEV or PHEV) and battery size. Their findings indicate that as early as 2019, for smaller battery-sized BEVs, the savings in fuel and maintenance expenses nearly offset the initial price difference compared to similar ICEVs. It is projected that by 2025, and especially by 2030, savings will exceed initial price discrepancies for all battery sizes and vehicle types. By 2030, it is anticipated that sale prices for smaller battery-sized BEVs may even be lower than those of traditional ICEVs (Figure 22. Lutsey, 2021).

22.

But, especially in the developing world, maintenance can be particularly challenging because the vast majority of all vehicles are produced overseas and because many vehicles are imported by parallel dealers at lower costs to consumers.

A car that cannot be repaired and that is expected to break soon will lose most of its value and would not help the transition. It could also damage the trust in EVs.

This lack of trained laborforce able to repair, and the lack of immediately available parts are two reasons that can discourage a potential buyer from investing in an electric vehicle. There is a challenge for countries with no domestic industry to develop a third-party maintenance capacity that covers the variety of models that are imported. This has often been brought up in our discussions with actors and users in the mobility sector in Rwanda. Cars that enter the Rwandan or African markets tend to be used and tend to spend a lot of years on the road. Therefore, a knowledge of how to repair them in affordable ways, and an easy accessibility to that knowledge, are crucial factors that make people choose a brand or another.

Toyota is very popular in Rwanda for that reason. The cars are known to be reliable, and their dominance within the market means that consumers can trust that someone will be able to fix their car. The fact that many Japanese hybrid models are present in the country can be explained by the same reasons. In the Japanese markets, hybrids represented 55% of the new sales in 2023 (Take, 2023). A shift in the market towards a higher EV ratio could have a ripple effect on Rwandan imports.

EVs run on complex and innovative technologies, and drivers we have spoken to have told us about the fear of being unable to access safe and reliable repair services. This is a factor, among others, that prevents them from switching to EVs.

The market also has the issue that, totaling so few models: around 300 electric cars, it would be unrealistic to attempt to create a local supply of spare parts. This means that when an EV breaks, needed spare parts must be directly imported.

In a meeting with Kabisa Electric Ltd. —a Kigali-based e-mobility company and parallel import vehicle dealership —we

learned that the import of spare parts is a very important part of the service offered to clients but that shipping them at an affordable price can take months. Here, something that can be considered is the potential of a regional open market between East African countries.

When it comes to two-wheelers, the lack of model diversity is an advantage for maintenance, as it reduces the diversity of spare parts needed. The fact that some companies assemble the bikes in their facilities in the city gives them the knowledge and the capacity to repair that electric cars do not have.

2.5. CHARGING AND POWER >>>

Charging might—after price—be the biggest barrier that EVs face in comparison with ICEVs. Several limitations linked with charging stations can reduce the attractiveness of an electric vehicle. The first one is the density of their coverage of the road network. A customer who fears running out of power with no assurance of always being near a charging point will not want to buy an EV. This issue is especially challenging in large countries, where the road network can be extended but with a low user frequency. For the customers who tend to drive in cities, this is less of a problem as denser areas are the best equipped, and as they may be able to charge at home, but for the drivers that have a habit of driving in rural and remote locations, proximity to charging stations can be concerning.

Where the EV market is just emerging, one issue is that a low number of electric vehicles on the road might not justify the cost of constructing an extended charging station network. In some developing countries, the lack of electric connectivity in osme parts of the territory would further increase the cost of construction.

In big cities such as Beijing, Shanghai, Shenzhen, Guangzhou, and Wuhan, where the EV market is well developed, the coverage of charging facilities is relatively high, generally meeting the daily needs of car owners. However, in the Northeast,

Western regions, and some parts of the Central and Eastern regions, the coverage of charging facilities is lower, presenting an overall uneven distribution. In addition to regional disparities, there is a significant gap in the quantity and coverage of charging infrastructure between urban and rural areas. By the end of 2022, EV owners in central urban areas of Shanghai, Beijing, and Shenzhen can find a public charging station within a 20-minute drive from almost any location (ICCT, 2024).

However, in suburban and rural areas, it is difficult to find a usable public charging station nearby. The EV penetration rate is relatively low in these areas as well. Highways are also a weak point in China’s public charging infrastructure network.

As of June 2023, there were 18,590 public charging stations along highways, accounting for only 2% of the total number of public charging stations nationwide (ICCT, 2024). Still, charging remains a barrier to EV transition in a way. In our survey, when asked about the disadvantages of electric cars that can impede them from switching to EVs, 73% of ICEV owners answered that “charging is inconvenient” and 82% that the short battery is a problem for them.

Even amongst EV owners, according to research and our survey, the lack of charging facilities along the way is the primary concern for EV owners when undertaking long- distance drives.

In our survey, out of 102 people, only 18 answered they would use an electric car for journeys over 500 kilometres, and 15

of them said they would not use it at all for long-distance travel, even below 300 kilometres which is an average range for an EV battery.

This reluctance comes from the fact that there are an insufficient number of charging stations (61 respondents) and concerns that long charging times may affect progress (56 respondents).

Rwanda has the advantage of being a relatively small country in size. Kigali is in a central position and most of the country is within a three hour-drive radius around it. This is optimal for the development of a charging network, as there is a limited need for stations around the country. It is a much more expensive enterprise in larger countries like Kenya, Tanzania, and Uganda, where the EV market is beginning to emerge.

Focusing the charging infrastructure development in urban centers makes economic sense, as cities are the places where EV owners are generally clustered, therefore where the return on investment will be the most profitable.

However, this creates a barrier for the population that lives in the countryside, which represents nearly 90% of Rwanda’s population, or the population that drives extended distances outside the city. Living in the city also poses limitations to who can purchase an EV, as many housing units have no garage, no space to park a car or a vehicle, or no connection to a drivable road.

Electricity connection is not a major issue in Rwanda, as more than 95% of Kigali’s population is connected to the grid, and 77% of the country’s total population.

Electric motorcycles face even greater challenges to develop in the rural world, as most of them are operated as taxis and need to stay in the city to make their money. For the same reasons, the e-motorcycle

companies focus their development in cities. Ampersand for example has 27 swapping stations in Kigali, none in the countryside.

The absence of a full coverage of the territory in stations can hurt EV growth as they limit the size of the potential market and can discourage existing owners from using or keeping their cars.

Motorcycles using the battery swap technology are also fully dependent on their swap station network, for they cannot be recharged at home and drain their charge faster than electric cars.

In addition to finding a charging station, some consumers also complain about the reliability of chargers. In the same way the cars carry more complex technology and can break in numerous ways, chargers have been known to malfunction and that can make the charging experience tedious. The time needed to charge a vehicle is one of the most widely cited barriers to EV adoption. This is mostly an issue for consumers that drive long distances in a single journey. If electric refueling is usually cheaper than fossil fuel, the cost in time is greater for EVs. One solution is battery-swap technology.

That has been done successfully to motorbikes, and some Chinese vehicle manufacturers are attempting to do the same thing within the automobile segment in China (Cheng, 2024).

Time is less of an issue when charging at home, as it can be done overnight. But home charging requires space to park a car directly outside the owner’s home. It also requires a stable connection to the electricity grid. That being said, electric cars can also be a solution to electricity stability - with some higher-end models offering options to reverse power a house in case of a power outage.

2.6. GOVERNANCE

Governments also have a role to play in the EV transition. In developing nations, that role can be limited as governments lack funding, lack capacity for action or power of implementation.

The Rwandan government is very involved, we will see, in the development of a policy framework incentivising EV adoption. But Rwanda, like so many other nations that have yet to see an EV market emerge, has other—often more pressing—spending priorities. This can make the adoption of EVs slower than desired. Additionally, the massive investment that comes from policing the EV sector in developing countries only benefit a very small, wealthy part of the population, with progressive spread set to take decades. This perspective could discourage governments from getting involved.

Government capacity can explain the division between wealthier countries that tend to opt for subsidy strategies, like in Europe, and developing countries that prefer tax cuts. The price of the car is reduced in both cases, but one requires a direct budget while the other one does not. For this reason, it might also be easier to implement.

Beyond price, what slows potential buyers from purchasing an EV is often not a single factor but an ensemble of them.

Generally, the majority of the population still consider eVs as less convenient or attractive compared to ICEVs.

Most people don’t have an exact knowledge of the extent of the barriers, but just an idea of them. To be efficient, the efforts in developing a framework favoring EV adoption needs to be comprehensive and needs to be accompanied with education and communication campaigns.

A charging point for two-wheelers in China.

KEY TAKEAWAYS

• EV prices are decreasing but there is still an affordability gap at the entry level. Local mass production has allowed China to fill that gap.

• The lack of EV presence on the secondary market is a strong barrier to their spread in the developing world.

• The variety of EV models, especially in terms of affordability and design, is still catching up to the vast selection of traditional gasoline vehicles. This can limit consumer choice and make EVs less attractive to a broader market.

• However, China boasts a rapidly growing domestic EV industry with a diverse range of models catering to different price points and preferences. This abundance of choice is a contributing factor to China’s EV leadership.

• Concerns about limited driving range, reliability, and battery lifespan continue to deter potential buyers. A lack of awareness and education about EV capabilities can perpetuate these anxieties.

• While range anxiety persists in China, especially for older models, continuous advancements in battery technology are helping to tackle this concern. Additionally, government-backed education campaigns are working to dispel myths and improve consumer understanding of EV capabilities.

• The density and reliability of charging stations, particularly outside urban areas,remains a concern. This can be a significant barrier for long-distance travel and for those without access to home charging. Time constraints associated with charging also play a role.

• China has made significant strides in building a national charging network, particularly in major cities. However, disparities remain between urban and rural areas, and long- distance travel can still be hampered by a lack of readily available charging stations.

• Rwanda’s charging infrastructure is still in its infancy and is concentrated primarily in Kigali. This lack of widespread charging facilities is a major deterrent for EV adoption throughout the country, but is fitting for the e-motorcycle fleet of taxis whose activity remains in the city.

• The perceived complexity of EV technology raises concerns about repair costs and availability of qualified technicians, especially in developing countries with limited experience in servicing EVs.

• China has a well-established network of service centres for domestic EV brands. However, concerns persist about the cost of replacing batteries, a core component of EVs.

• The limited presence of EVs in Rwanda translates to a lack of qualified technicians and readily available spare parts. This raises concerns about repair costs and turnaround times.

• Limited government funding and capacity in developing countries can hinder the development of charging infrastructure and other support systems.

• The informal urban layout of cities in the developing world can be unfavorable to the possession and circulation of personal vehicles.

STATE OF EV INCENTIVES IN THE WORLD

Barriers to EV adoption are varied. There are often a higher number of barriers within developing markets - both as a result of consumer reluctance and logistical challenges. In some cases, these barriers will inevitably resolve themselves over time - for example, with more vehicles on the market, prices will decrease and market supply will flow. Some others, however, need government intervention such as to develop charging networks and raise awareness. The role of the government and other involved actors can also be to speed up these market evolutions by aiding the market in surmounting the barriers or reducing their weight in consumer decision-making. In the next section, we will see what incentives and strategies are put in place in the world and in our two case study countries to boost the EV transition.

Our research reveals that EV markets are unevenly developed, with only a few having a significant market share of EVs. To understand why these markets, develop at different paces, we examined the current state of incentives encouraging EV deployment compared to traditional ICEVs. EV incentives vary widely and are influenced by multiple factors.

One primary reason is environmental concern, particularly given the climate crisis. For instance, in France, the environmental impact of a small BEV over its entire lifecycle (from production to end-of-life) was

two to three times less than that of a comparable ICEV in 2016, a trend expected to continue through at least 2030 (Chéron & d’Halluin, 2017).

However, states may also have other motivations for promoting EV adoption through incentives. For countries that are net importers of fossil fuels, EVs present an opportunity to reduce dependency on imports. Prof. Ning Wang (N. Wang, personal communication, 9 May 2024) from Tongji University explained that China’s early focus on electric cars was driven by the desire to lessen reliance on foreign oil.

By using domestically produced electricity, countries can reduce their dependence on other nations for their transportation needs.

Additionally, the relatively new commercial EV technology allows countries without a strong car manufacturing history to develop their automotive sector, promoting economic growth and increasing independence from other states. China, for example, has successfully promoted domestically produced EVs through incentives, leading to 74.3% of EV car sales in 2021 being from Chinese native brands, compared to 38.9% of ICEV sales from Chinese brands in the same year (Chu et al., 2023).

Furthermore, incentives may exist at different levels of governance. Most commonly, these stem from the national government of the state itself, but they may also come

from sub-national and municipal governments or from the private sector. Ultimately, consumers may also be incentivised to buy an EV because of brand-specific incentives—as we explain in section 3.1.f. Regardless of the motives behind the adoption of incentives or the governance level at which those are enacted, the final goal of incentives when it comes to EVs is to kickstart the EV market and have consumers prefer this over ICEVs.

To get a clearer picture of the state of incentives in the world, we have created a typology of incentives, regrouping them under larger umbrella terms so that it is easier to understand what these incentives do. We first approach each type of incentive at a more global level to explain what kind of incentives we can find under each umbrella term before taking a closer look at our specific case studies and what this means for them.

23.

If other numbers show that Europe, China, and to a lesser extent the US, are leading the EV transition, this map shows that other countries around the globe are also implementing comprehensive policy strategies. By comprehensive, we mean a plan that mixes financial and non financial, at purchase and long term incentives. Partial means at least one incentive is in effect in the country. South America sets an example, but many countries across all continents and even Africa, have at least partial incentives that aim at promoting EV adoption.

Source: (authors)

Figure

3.1. A TYPOLOGY OF INCENTIVES >>>

PURCHASE-SPECIFIC INCENTIVES

Purchase-specific incentives are incentives that lead to some sort of financial gain for the consumer when purchasing their vehicle. These incentives mainly take the form of subsidies given to the buyer to make EVs more attractive than ICEVs, or they can also take the form of a tax break by reducing the amount of taxes due to the government from the buyer. The private sector and brands may also be involved in schemes that make EVs more affordable to consumers through attractive financing options. These kinds of purchase-specific incentives can be found in most countries that adopt pro-EV incentives.

In Norway, BEVs and FCEVs (Fuel Cell EV) are exempt from the registration tax, which amounts to approximately 100,000 NOK (8,643 EUR).

In addition, BEV buyers are exempt from the 25% VAT typically applied to the base price of electric vehicles, excluding any registration tax (Andreas & Hasan, 2020). China had invested a total of approximately 147.8 billion CNY (19.4 billion EUR) in subsidy funds from 2009 to 2022. With the growth of the EV market, the effectiveness of financial incentives declines, and the value of large-scale purchase subsidies and tax cuts is being reduced.

Up until 2015, each new energy vehicle that passed the review could receive an average subsidy of 106,400 CNY (14,000 EUR) in China, but by 2019, this number dropped to 57,000 CNY (7,500 EUR). These subsidies were the main purchase incentive that was used, and they were based on the range of the BEV being sold.

So that the higher the range of a BEV, the higher the subsidies were (Figure 24). It is also important to note that as battery technology evolved, the Chinese government stopped incentivising lower-range BEVs in favor of higher-range BEVs, and as the market for those EVs grew larger over the years, overall purchase incentives were reduced throughout the country.

Since the national government’s purchase incentives were stopped throughout the country, it now falls onto the various brands to incentivise users to buy their EVs. As we saw during our fieldwork, many dealerships have attractive financing solutions for their customers. In addition to brands offering attractive deals on their EVs for customers, the local governments have also stepped in, with the Shanghai government offering a temporary 10,000 CNY, or a roughly 1,315 EUR subsidy as of 2024, for any resident buying an EV.

Figure 24.

Source: (T. Zhang et al., 2024)

In our case study of an emerging electric vehicle market such as Rwanda, purchasing incentives have been crucial in promoting the affordable adoption of personal e-mobility throughout the country. While these financial incentives have taken many forms, they can broadly be divided into three distinct categories: tax cuts on EVs, a limited amount of direct financing for e-motorcycles, and the development of private sector micro financing models.

TAX CUTS

Rwanda first implemented electric vehicle incentives through tax breaks on the cost of EVs and hybrid vehicles in 2021. This has primarily been implemented in two different forms—the elimination of the Value Added Tax (VAT) on vehicles sold in Rwanda and the abolishment of import duties for new EVs entering the country—and has also been applied to spare parts, battery technology, and charging station equipment used for e-mobility purposes (Rwandan Ministry of Infrastructure, 2021; Twagiromana, 2023). In applying these tax cuts, the Rwandan Ministry of Infrastructure (MinInfra) and the Rwandan Revenue Agency (RRA) have taken a rather liberal or ‘laissez-faire’ approach to regulating which vehicles are eligible for tax rebates. As a result, all models of EVs and hybrid vehicles—no matter the year they were produced—are currently eligible for tax incentives (R. Gorajia, personal communication, 20 May 2024). The same goes for sales avenues, as both regulated automotive dealers and unlicensed parallel importers are exempt from paying taxes on EVs they sell in Rwanda (Ibid.).

DIRECT FINANCING PRIVATE SECTOR MICRO FINANCING

Direct financing of e-mobility by government agencies and NGOs in Rwanda has also occurred, albeit on a limited basis. This differs from many other already developed EV markets, which have widely subsidised the cost of an electric vehicle. Early in the process of developing a domestic electric vehicle market, the Government of Rwanda financed the purchase of 24 electric motorcycle taxis to trial their durability and effectiveness within the market (Twagiromana, 2023).

A similar scheme was also financed by USAID in support of Ampersand Rwanda’s initial e-moto fleet of 20 vehicles operating in Kigali (Ampersand Inc., 2022). Similar work funded by the United Nations also experimented with the retrofitting of ICE moto-taxis into e-moto-taxis as part of Rwanda Electric Motorcycle’s initial operating plan and reduced the cost of purchasing an e-moto to 600,000 FRW—430 EUR—from over 2,000,000 FRW— 1,438 EUR (Prince, personal communication, 24 May 2024). Both highlight the role of foreign NGOs and transnational bodies in the financing of e-mobility throughout developing countries.

Micro-financing schemes do not emanate from government policies but from private companies that offer customers weekly or monthly pay plans instead of payment in full. This system is very popular among motorcycle taxi drivers, and had previously gained popularity for ICEV models.

Learning from this model, one element of the EV transition we need to keep in mind is that governments are not the only entities that have stakes in play. Private actors also have everything to gain from developing the market, especially because of the various ban deadlines and penetration targets that exist around the world. For this reason, companies are also putting in place incentives to promote EV adoption, with the objective of improving their sales.

CHARGING SPECIFIC INCENTIVES

Being able to charge an EV battery efficiently and affordably, is one of the main concerns of consumers across the world, therefore, governments and brands alike try to incentivise consumers by rendering the charging process easier.

As such, many governments are making the establishment of publicly accessible charging stations easier so that consumers, especially those living in urban settings, have a readily accessible charging point for their car. Governments may also give tax rebates to consumers

that have the possibility to install a home charging point so that it becomes cheaper.

The price for consumers of electricity at charging stations may also be capped at a certain threshold so that it is never more expensive for them to charge their car than it is to refuel an ICEV with fossil fuel.

The investment in charging infrastructure has a significant influence on EV development. Since 2014, China has encouraged the development of charging infrastructure. As such, China had the most EV chargers in the world in April 2024, standing at 9.613 million chargers units of which 2.977 million are public charger units (China Electric Vehicle Infrastructure Promotion Alliance, 2024). In 2022, the United States enacted the Inflation Reduction Act which is now being used to invest 46 million USD (42 million EUR) in the enhancement of EV charging networks (The White House, 2024).

Brands on their end may also offer at-home charging packages to go with the sale of an EV, or they may offer free or discounted charging to their customers for a certain period after buying the car. This was the case for NIO in China, which used to offer a charging station for each EV sold (up until August 2023), or XPeng who offered a year’s free charging fees for its consumers.

The goal of these incentives is to both reduce the range anxiety that many consumers have when it comes to EVs, and also to make charging much cheaper than it is to refuel an ICEV with gas, keeping them competitive in the long run.

LICENSE PLATE ALLOCATION SCHEMES

License plate allocation schemes are a type of incentive specifically related to the way EVs are licensed. Indeed, in some areas of the globe, it may be hard to obtain a license plate for a variety of reasons, but most often because the government controls the number of plates issued each year. This means that license plates can either be issued through a lottery system, a queuing system, or they can be prohibitively expensive to obtain. However, to push consumers towards EVs instead of ICEVS, governments may either remove or reduce those licensing limitations for EV buyers.

As of 2024, seven Chinese cities have a license plate allocation scheme through which plates are auctioned off or made available through a lottery system (or a combination of the two).

In Rwanda, companies like Kabisa offer their EV customers the installation of chargers at their homes and workplaces if space is available. They stated that, as of now, the case where there was no space to install them did not present itself. For public charging stations, the Government of Rwanda allows providers to sell electricity at industrial tariffs and thus propose a price lower than residential and non-industrial ones (Rwanda Energy Group; Twagiromana, 2023). This offer does not apply to home chargers. Additionally, the Government of Rwanda has allowed private car dealerships and EV manufacturers to lease government land free of charge in order to install EV charging infrastructure (Twagiromana, 2023).

Government of Rwanda has allowed private car dealerships and EV manufacturers to lease government land free of scheme back in 2002, followed eight years later by Beijing in 2010. These schemes are necessary in the largest Chinese cities in order to regulate the number of cars registered in one city, given that vehicle congestion and pollution has become a major issue in recent decades.

These schemes most notably prohibit non-local car drivers from entering the city (Huang & Wen, 2019). However, in the case of Shanghai, and other cities with a license plate scheme, buyers of New Energy Vehicles, meaning buyers of BEVs, PHEVs, and Fuel Cell Electric Vehicles (FCEV), can circumvent these restrictions and apply directly for a license plate. In the case of

Shanghai, those license plates are free, which makes them much cheaper than traditional plates bought at auction.

On the other hand, license schemes for two-wheelers exist as well. In the same way, 2-wheelers in Shanghai can also apply for a free license plate (Shanghai Municipal People’s Government, 2024).

Figure 25.

Source: (Huang & Wen, 2019)

USAGE INCENTIVES STANDARDS

Usage incentives are a broad category of incentives related to the usage of an EV.

For example, EV users may get preferential treatment in city centres, including with designated parking spots or access to certain otherwise-restricted roads. As we learned during our fieldwork in China, Shanghai restricts its access to certain areas of downtown, especially viaduct highways, solely to NEVs during the day. Meanwhile, purchasing a new energy vehicle comes with a free Shanghai license plate (X. Zhou, personal communication, 3 May 2024).

This means that fewer cars should be entering the city, and those that do, do not locally produce greenhouse gas, and given that EVs are quieter overall, there is also less noise pollution in the restricted areas. In the same vein, the neighboring city of Suzhou allows single occupants in EVs to use bus and high-occupancy vehicle (HOV) lanes. Within Kigali City, the Government of Rwanda is in the early stages of developing similar policies that would give EVs preferential treatment when entering congested neighborhoods of the city (Twagiromana, 2023).

Standards are a very specific type of incentives that may have varying effects on the EV market. These standards are enacted nationally or internationally, and help improve EV and charging compatibility across brands. The most common standard based incentive for EVs is the standardisation of the charging port across brands so that all EVs can be connected to all charging stations.

After more than a decade of development, China has established a relatively comprehensive standardisation system in the field of electric vehicles. As of January 2024, the National Standardisation Administration has approved and issued a total of 84 national standards related to the new energy vehicle sector, covering various aspects such as vehicle models, batteries, emissions requirements, and charging infrastructure related standards (Car Testing Network, 2024).

The earliest regulation was the “Administrative Measures for the Market Access of New Energy Vehicle Products” issued in 2006, which laid the foundation for China’s electric vehicle market. Between 2015 and 2020, China issued and revised numerous regulations and standards to regulate market behavior, eliminate underperforming enterprises, and build consumer trust in domestic products.

These regulations and ordinances complement China’s environmental protection and industrial upgrading strategies. For instance, China implemented a policy requiring that new energy vehicles

purchased by non-private users must accumulate over 30,000 kilometres of driving to qualify for national subsidies in January 2017. Products from companies such as Chery, BAIC, and Dongfeng failed the mileage review in 2019 (Route 149, 2021). Additionally, China clarified and tightened the technical thresholds for market entry of new energy vehicle products, issuing over 40 detailed technical standards, including seven on batteries, two on electric drive motors, four on vehicle safety, and three energy efficiency standards (ICCT, 2021).

Currently, within Rwanda, the role of standards in the e-mobility and electric vehicle markets remains limited. Our research in the country indicates that the only existing standards are those for internal combustion engine vehicles, which have been carried over and applied to EVs by regulators and officers assigned to the Traffic and Road Safety departments of the Rwanda National Police.

An example is the requirement for all four-wheel vehicles in the country to carry a spare tire if they develop a flat tire while on the road.

While ‘traditional’ car manufacturers and models—such as the Toyota or the popular Rav 4—are already designed to meet this standard, new entrants to the market are not always compliant. This includes Kabisa Electric Ltd. and PrEV Rwanda Ltd., whose product fleets relies partially on new-to-market BYD cars (M. Sichinga, personal communication, 15 May 2024; P. Bisenga, personal communication, 17 May 2024).

While conversations are ongoing over the future of said standards, they should provisionally be viewed as a disincentive towards the adoption of specific models of four-wheel electric vehicles in Rwanda.

As of early June 2024, Rwanda’s future electric vehicle- specific incentives remain in development. Most of the stakeholders we met in Kigali anticipated that more information would be released by the end of June 2024—or Q2 2024—but the extent to which these new standards would transform the market remained unclear. That being said, two clear areas for policy development were highlighted in our conversations, including the standardisation of charging ports for four-wheeled electric vehicles and commercial trucks entering the market and the creation of a standard connector between e-moto bikes and their swappable batteries.

While the standardisation of both forms of charging infrastructure may bring about net positives for incentivising e-mobility adoption in Rwanda, they may also risk increasing the overall costs associated with the adoption of EVs and potentially serve as a disincentive for certain consumers entering the market. In the case of fourwheeled vehicles, upcoming government standards on the market may create a‘universal’charging adapter for all vehicles and fixed charging infrastructure entering the market.

Up until this point, car dealers and manufacturers selling in the country could choose between the Chinese ‘GBT’ or the European Union ‘Type 2/CCS2’ charging standards, with many opting for the former option (Kabisa, 2023).

While in a small EV market like Rwanda, this may not cause many issues— as individuals may purchase charging-type adapters and fixed chargers are few and far between—it may become a barrier as the market continues to grow. The choice between the Chinese and EU charging standards also presents a potential cost to consumers, as the production and importation costs for ‘GBT’ charging infrastructure are considerably lower than their ‘Type 2’ counterparts (M. Sichinga, personal communication, 15 May 2024).

A similar argument could be made for the standardisation of battery connectors on e-moto bikes, as newcomers or smaller manufacturers may be unable to compete with larger market actors.

LIFESTYLE AND BRANDING INCENTIVES

Customers in certain markets, EV brands have to become more competitive against each other rather than simply competitive against ICEV vendors. This means that in addition to proposing a car, brands sell a lifestyle idea that comes with becoming an owner of their specific EVs.

As China moved to reduce its incentive offering, brands have to strategise and innovate in order to be more competitive than their counterparts, and as such, brand sell their EVs as part of an already established ecosystem, mainly so that their cars and information about them is accessible through the consumer’s phone of the same brand (Huawei Store Employee, personal communication, May 8, 2024).

EV brands also innovate on features available inside their cars by proposing unique features like massaging seats. Furthermore, to strengthen consumer brand loyalty, they offer various benefits to their customers. Therefore, a brand’s customer can participate in brand-backed activities and access specific venues, exclusive to the brands’ clients. These activities can be a lottery, a free coffee at the dealership, or it can be more elaborate by giving access to free brand-backed cafés, conference rooms, lounges, etc. For example, NIO has established exclusive spaces in Shanghai’s CBDs for its owners. Other brands regularly organise owner events to enhance brand identity and a sense of belonging.

EDUCATION ON EVS ANTI-ICEV POLICIES

While not being a direct incentive per se, education plays a role in the uptake of EVs across the world. As consumers become increasingly aware of the causes and effects of climate change, as well as the potential benefits of EVs in comparison to ICEVs in that regard, they may be tempted to make the less carbon-intensive choice of opting for an EV despite the possibly higher upfront capital cost of EVs. Not all EVs are created equal, however, and the perception of EVs as a “not-much-greener” option persists among many consumers. Furthermore, more than just the choice of a less carbon- intensive technology, education of the consumers concerning the availabili ty of charging infrastructure, reliability of the technology, and various other aspects of EV technology is important to appease such things as range anxiety and correct the perception of EVs.

In the case of China, we found that many consumers were rather educated on the matter. What was striking was that con sumers who had bought an EV, or those who were seeking to buy one, were more interested in learning more detailed infor mation about EV technology, rather than simply gaining insight into the fact that EVs are “greener” than ICEVs.

Within the Rwandan market, the overall level of knowledge of electric vehicles through education schemes remains limit ed. Up until recently, the role of educating consumers on the durability and effective ness of EVs in the market has been left up to individual car dealerships and manu facturers.

As a result, Ampersand— the country’s leading e-moto company—and Kabisa have made significant investments in researching and communicating the effectiveness of their vehicles currently on the market. That being said, recent work by the German development agency GIZ to co-found the “Kigali Smart Mobility Lab” alongside Carnegie Mellon University-Africa has led to the creation of a domestic knowledge and research sphere into the role of electric vehicles in the country (Trufi association, 2024).

While most EV incentives at least partially serve to discourage the purchase or use of ICEVs, strict anti-ICEV policies are specifically designed to make it more difficult to use or maintain an ICEVs.

While we did not encounter specific examples of this for our case studies, there are a few notable cases around the world of purely anti-ICEVs policies. Ethiopia is the first country in the world that completely banned the import of ICEVs into the country regardless of whether these are new or used vehicles.

This policy entered effect on 29 January 2024 (HKTDC Research, 2024), and while it will favour the uptake of BEVs in the short term, this policy does not specifically incentivise BEVs, and other FCEV technologies may also gain from this ban in the future such as hydrogen FCEVs. Given that the country has a low national production of vehicles, this essentially terminated the sale of most ICEV vehicles in the country bar for those already in the country.

Other places such as the European Union, have planned for similar policies. In the European Union, the sale of new ICEVs will be forbidden starting in 2035, leaving only the secondhand ICEV market in place (Le Monde & AFP, 2024).

Other types of policies may also disincentive consumers from buying and using ICEVs. This is often achieved through the tax policy system in the form of increased fuel taxes, so-called ‘carbon taxes,’ or the creation of a cap-andtrade system (Frank, 2014). While such programmes are often designed to reduce reliance on fossil fuels as a form of climate mitigation — or as a tool to fund road maintenance — they may simultaneously move consumers away from costly petroleum-based fuels towards more affordable EVs.

China does not have a prohibitive taxation system in place when it comes to fuels as it stands. Gasoline tax currently stands at 0.20 EUR per litre, while diesel tax sits at 0.16 EUR per litre (IEA, 2023a). Given the average price of gasoline was 0.88 EUR per liter in May 2024, the fuel tax on gasoline accounts for a bit less than a quarter of the final price, while in other countries such as France, the fuel taxes account for roughly 60% of the price of gasoline and diesel at the pump (French Ministry of Economy, Finance, and Industrial and Digital Sovereignty, 2023).

While Rwanda does not yet have any specific usage disincentives—outside of expected fuel taxes—towards ICEVs, it should be noted that the already high costs of fossil fuels in the country may contribute to a favorable market environment for EVs to succeed.

While it does not have the highest fuel prices on the continent, current fuel prices in Rwanda—1.17 EUR per liter, as of 2024— are higher than Africa’s leading national economies in South Africa—1.11 EUR per liter—Nigeria—0.39 EUR per liter—or Algeria at 0.31 EUR per liter (Galal, 2024). Given that the country has limited petroleum reserves and relies heavily on imports to fuel its national automobile fleet, this high overall fuel cost should also be seen as a disincentive for future ICEVs in the market.

TIMELINE OF KEY CHINESE NEV POLICIES

3.2. UNEQUAL DEVELOPMENT OF INCENTIVES

More than just having varying motivations for providing incentives, there are many factors to consider when looking at the development of incentives in each country. Environmental and industrial considerations are just one part of a wider set of motivations dictating the development of incentives.

Upper-income countries often have the most cars per inhabitant and tend to have more incentives to transition towards EVs as they already have a developed ICEV market. This is often coupled with the fact that those countries or regions have a vested interest in the car industry, as is the case with the United States, Europe, or China. Countries with a less developed ICEV car market, or a market centred around second-hand cars, tend to have fewer incentives towards EVs, often because EVs tend to be much more expensive in those countries than their secondhand ICEV counterparts, which means that the population does not have an incentive to switch to an EV, especially because things such as charging infrastructure are only in their infancy and in some countries, access to electricity may be intermittent such as in South Africa with its rolling blackouts.

Therefore, even if ICEVs are more expensive in the long run, their upfront capital cost tends to be much lower when they are secondhand, and the reliability of ICEVs is often perceived as better than that of EVs even though EVs usually require less maintenance overall.

Figure 26.

Source: (Cui & He, 2020; Interesse, 2023; S&P Global, 2019; W. Zhou, 2019)

However, it is true that EVs require more specialised equipment and knowledge that ICEVs do not require due to the increased amounts of electronic components in EVs. Now, African countries such as Rwanda are betting on electric 2-wheelers more than cars as they consume much less electricity, and unlike cars, it is much easier to simply swap batteries rather than charging at a charging station, especially when charging stations may not always be operable.

However, when we look at the unequal deployment of EV incentives, it is not only about questions of feasibility, but also about governance and the different levels of governance involved in the decision. One striking example would be that of the European Union and its different members. In the case of EV incentives, the European Union can be seen as playing the punitive role as it moved to ban the sale of new ICEVs by 2035 (Le Monde & AFP, 2024) in all its member states to reach its climate neutrality goals.

On the other hand, the member states of the European Union take a more rewarding approach, such as France offering a subsidy of up to 7,000 EUR to individuals buying an EV. Therefore, different levels of governance have various tools at their disposal when it comes to deploying incentives as they do not answer to the same constituencies, and thus have varying levels of accountability.

3.3. STAKEHOLDERS AND TARGETS OF INCENTIVES

Even if our report solely focuses on the impact of incentives on EV sales by individual road users, it is important to note that in certain cases, such as that of China, governments tend to adopt a comprehensive approach by creating both demand-side and supply-side incentives. The supply-side incentives are targeting car manufacturers to increase electric vehicles production on their side, to deal with an increase in demand linked to the demand-side incentives. In China, supply-side incentives included development prizes, manufacturing prizes and monetary rewards when they reached certain levels of EV production and sales (T. Zhang et al., 2024).

Outside of the national government, local governments also offered incentives to local manufacturers, such as tax breaks and subsidies to encourage EV production. This is the case across 17 cities in China, including Shanghai. This further highlights the role that cities can play as central stakeholders in EV incentive policies. The International Council for Clean Transportation in 2021 identified 25 EV capitals in the world which are leading the ICEV to EV transition, among which 13 cities are in China (Bernard, 2021). Countries are the actors that are mostly pushing for EV incentives at national level and that are organizing the transition. However, cities can also play an important role at th elocal level - particularly given considerations around climate change or air pollution in urban environments. An ICCT study established a ranking of Chinese cities

depending on the deployment of local incentive policies for EVs, which can differ widely across different cities. Shanghai, Shenzhen and Xi’an were designated as cities that are at the forefront of local incentive development (Qiu et al., 2019). Indeed, these cities are the ones that were and still are broadening the national subsidy schemes, as, on top of providing their own local subsidies, they are also the ones putting in place usage incentives, restricting ICEV’s access to the city, or creating the licensing scheme like Shanghai is doing.

Figure 28 shows the evolution of EV incentive policies along with the evolution of the market: in China EV incentive policies were adaptable and evolved alongside the market. Adapting incentives by the targeted adopter group is crucial to maximize EV adoption. Introducing new types of policies at strategic points can act as a catalyst, sparking fresh rounds of sales and reaching entirely new consumer segments. By constantly refining the incentive mix based on market dynamics and adopter behavior, policymakers and brands can accelerate the shift to EVs while ensuring the policies are not too costly. In China, early adopters and the early majority were the ones that benefited from the highest levels of purchase subsidies and that still benefit from charging and usage incentives today. We are currently at a transition point between the early and late majority, which marks a transition between more government-driven types of incentives to market driven incentives organized by the brands themselves once the market is mature enough.

Overview of EV promotion actions in main Chinese cities

the city level.

Source: (He et al., 2018)

Different incentives at different steps of the transition

A representation of the complexity of targeting the right customers with the right incentives, at the right step of the EV transition Source: (authors)

Figure 27. Shenzhen, Xi’an and Shanghai are leaders in terms of number of incentives implemented at

Figure 28.

KEY TAKEAWAYS

• Countries have diverse reasons for promoting EVs, including environmental concerns, reducing dependence on fossil fuels, and boosting domestic car manufacturing. China had both motivations, while Rwanda is particularly interested in attracting international investments into the country through its innovative EV policies.

• National governments, local authorities, and even private companies offer a range of incentives, encompassing purchase subsidies, tax breaks, charging infrastructure development, and usage benefits.

• In China, different types and levels of incentives work together to form a comprehensive and holistic network of incentives. They mix purchase incentives, charging incentives, usage incentives, licensing schemes, and establishment of standards.

• As the Chinese EV market matured and became more competitive, purchase subsidies from the central government were reduced and local incentives focused on usage incentives. EV brands are also setting up their own financial and community-based strategies.

• In Rwanda, it is mostly tax breaks and innovative forms of financing that are pushing for the development of an electric mobility market.

• Rwanda, which does not have domestic manufacturing, focuses its strategy on tax and custom duty reduction on vehicles, parts, batteries and charging equipment. This targets both buyers and sellers.

• Developed car markets with established ICEV industries tend to have more EV incentives compared to developing countries with limited infrastructure and affordability challenges.

EFFECTIVENESS OF EV INCENTIVES

There is substantial evidence that purchasing incentives—especially direct financial support from government agencies—are one of the key factors driving the development of the global electric vehicle market. As mentioned above, there are various types of incentives that are implemented in different countries and regions, which has resulted in disparities in EV market development. For example, in leading EV markets in China, Europe, and the United States, financial subsidies are the major policy, along with others. On the other hand, financial incentives play less of a role in markets like France or Japan, as charging infrastructure, electricity prices, and other factors also affect EV adoption. Therefore, it is imperative to evaluate the effectiveness of incentives on electric vehicles and identify how effective they are on an individual level.

Effectiveness has abundant meanings regarding the incentives of electric vehicles, such as the market development before and after incentive implementation, the environmental benefits, public perspectives of electric vehicles, and so on. In this report, we mainly focus on the passenger car market changes with the implementation of EV-related incentives to investigate how and why incentives could substantially accelerate EV market development and personal automobility with our case studies. Therefore, this report reviews and compares EV incentive policies’ schemes, types, and impacts, figuring out which EV incentives are most effective. Alongside these successes, we must also discuss potential learnings, the equitable distribution of incentives, and work left to complete.

4.1. INCENTIVES AS THE MAIN ELEMENT IN EV POLICIES

Among the policies adopted by various countries regarding electric vehicles, there are both measures to stimulate the development and market growth of the electric vehicle industry and policies to restrict ICE vehicles and carbon emissions. The incentive policies that stimulate the development of electric vehicles have played an important role in the transition towards national electrification and decarbonisation, as these measures not only reduce reliance on petroleum energy and decrease pollution but also foster the growth of new industries and overall economic development. Generous EV incentive measures have been implemented by many countries, especially China, the United States, and select European countries (Hasan & Andreas Mathisen, 2020). As existing research suggests, incentives contribute to the increase in EV market share, the acceptance of electric vehicles, and the availability of charging infrastructure.

In China, the adoption process of electric vehicles is highly related to incentive policies from both the central government and local governments. From 2009 to 2022, national policies, especially financial subsidies, have spurred the rapid development of the electric vehicle industry and market. At the local level, cities have relatively large autonomy in terms of incentives for electric vehicles.

Different from the common perspective that purchase subsidies or rebates are the most effective incentive, there is a stronger relationship between EV sales volume and two demand-side policies: charging discounts and infrastructure construction subsidies (Qiu et al., 2019). Meanwhile, the most impactful incentives in metropolises like Beijing, Shanghai, and Shenzhen are easy or free access to license plates, purchase restriction rescission, and driving restriction rescission (N. Wang et al., 2017).

Due to the strict license plate restrictions in major Chinese cities, obtaining a car license requires a significant investment of time and money. Such incentive policies can effectively increase the willingness to purchase electric vehicles as they significantly reduce the costs of obtaining license plates and using cars daily. After the national purchase subsidies ended, incentive policies from local governments and EV brands continued to be effective.

4.2. LIFETIME AND SCALE OF INCENTIVE SCHEMES >>>

The effectiveness of incentives is associated with the scale, timing, and sustainability of policies. Generous EV policies are implemented by many countries in the world, including Austria, Canada, China, Norway, and the United States.

At the early stage of EV development, a large amount of monetary investment is effective to make the industry competitive in the market. Direct reduction or rebate of purchase and taxes is proved to be effective for the development of the EV industry. Financial incentives play an important role at the beginning of EV development, while policies related to charging infrastructure conduction and EV usage are more important in the overall schemes.

Apart from scale, the resourcing behind and stability of a specific incentive also impacts how effective it can be. In the case of China, the national level purchase subsidies had been implemented for 13 years, which is a relatively long period of time. This continuous subsidy has not only helped the growth of the industry but also cultivated a group of EV consumers, contributing to sustained market growth even after the subsidies end.

In Rwanda, the incentive schemes are very recent. The 2021 measures have focused on reducing the price of importation not only of cars but of materials necessary for the assembly and maintenance of EVs on the market and the development of charging infrastructures. The goal has been to favour the development of a whole ecosystem with the potential for future largescale domestic production. This development is reliant on government financing and international investment, on which the existence of many start-ups depends. Although the market is still small, the growth is visible, and the role of incentives cannot be questioned.

4.3. IMPACTS OF INCENTIVES ON THE EV MARKET >>>

The direct indicator of the effectiveness of incentives is the change in EV adoption before and after the implementation of incentives. Therefore, it is essential to compare electric vehicle sales data in different stages of incentive policies. Following our incentive classification, this part first discusses the impacts of different incentives on the EV market with our case study.

Financial Incentives at purchase

Purchase incentives, as the most prevalent form of incentives implemented globally to promote electric vehicles, are highly effective in reducing one of the primary barriers to EV adoption: the price.

Research from the ICCT (2016) compared the prices of two similar car models before and after incentives. The electric Nissan Leaf had a manufacturer-suggested price of 29,010 USD (26,851 EUR), while the ICE Nissan Sentra was priced at 16,380 USD (15,161 EUR).

The following figures illustrate how the gap between these prices changes after accounting for incentives. In China, subsidies and tax breaks reduce the price of the Nissan Leaf to below the 20,000 USD (18,511 EUR) mark, making it more affordable than the Nissan Sentra, which remains above this price. In the US, France, and Canada, incentives also reduce the

price of the electric model, though it remains more expensive than the ICE model. However, in countries where tax breaks are the sole form of purchase subsidy, the price of the EV does not decrease significantly and often remains higher than that of the ICE model (Yang et al., 2016).

China had invested a large amount of money in subsidy funds from 2009 to 2022. The subsidy policy was initially piloted in selected demonstration cities. In addition to national subsidies, these cities were also required to provide supplementary subsidies for consumers purchasing new energy vehicles. Compared to 2015, the sales of electric vehicles in China nearly doubled in 2016. The subsidy policy continued to intensify until 2018, during which sales of electric vehicles surged more than fivefold, from 150,000 in 2015

to 820,000 in 2018. In the next year, the subsidies were significantly reduced, and local subsidies were simultaneously canceled, according to “Notice on Further Improving the Fiscal Subsidy Policy for the Promotion and Application of New Energy Vehicles” (Chinese ministry of Finance, 2019).

Take electric cars in Beijing as an example. In 2018, pure electric vehicle models with a range of less than 200 kilometres could receive a combined national and local subsidy of 22,500 CNY (2,960 EUR), but with the new policy, the subsidy is zero. For mid-tohigh-end models with a range of over 400 kilometres, the combined national and local subsidy in 2018 was 75,000 CNY (9,868 EUR), but in 2019 it has decreased to only 25,000 CNY (3,289 EUR) (Beijing Daily, 2019).

29.

Estimated cost of the Nissan Leaf (EV) and Nissan Sentra (ICEV) across major markets in 2016, after including taxes, fees and incentives

Source: (Yang et al., 2016)

This directly led to a decrease in electric vehicle sales growth for the first time in 2019. Because of the decline in sales in 2019, the policy “Notice on Improving the Financial Subsidy Policy for the Promotion and Application of New Energy Vehicles” introduced in 2020 extended the subsidy programme by two years, until the end of 2022 (Chinese ministry of Finance, 2019). This policy specifically emphasised the necessity to smooth the reduction in subsidy intensity and pace.

In 2020, EV sales reached 1 million. In 2021 and 2022, electric vehicle sales grew exponentially, ultimately surpassing 6 million units in 2023. From a national perspective, purchase subsidies had a significant influence on EV sales in China.

However, the national level purchase subsidies were dropped at the end of 2022, while the EV market keeps growing, which is the result of local level incentives, the continuous improvement of charging infrastructure, and the cultivated consumer base and acceptance. Purchase specific incentives are attractive to early adopters (Gass et al., 2014) and drove EV market growth in the early stage.

Apart from successful experiences, failures or relatively less effective policies exist in the development of EVs all over the world. At the different stages of EV development, incentives may be more or less effective as well. Financial incentives, including purchase rebates and subsidies, are most effective when trying to kickstart the market.

However, financial incentives have increased the financial burden on governments, leading some countries, such as Germany, to abandon their subsidy programmes after a certain period. Another issue that arose in China was the phenomenon of subsidy fraud. In the initial stages of policy implementation, various loopholes existed that companies exploited to illegally profit. In 2016, five new energy bus manufacturers were exposed for typical subsidy fraud behaviors, involving subsidy amounts exceeding 1 billion CNY (132 million EUR). To close these loopholes, the government began to focus subsidies on genuinely advanced technologies, rewarding vehicles with longer driving ranges and lower energy consumption.

Rwanda’s decision to eliminate VAT taxes and important duties on import and sales of electric and hybrid vehicles has resulted in a visible rise in sales. At the time that the incentives were first introduced, just a few dozen electric vehicles had been sold in the country in the past few years. Between 2021 (when the policy was introduced) and 2024, the total sales grew to more than 300 BEV and 4,000 e-motorcycles. The incentives also supported the sales of hybrid cars, as around 3,000 have been sold since 2021. There was almost none before. In that sense, the incentive had both a negative and positive outcome - in that it enabled used hybrids to be imported onto the market.

ABG estimates that around 20 to 30 hybrids are imported new and sold in Rwanda in a year. This means all other hybrids are second-hand. We have no precise data on how many of the three thousand hybrid cars sold had hybrid engines that

Figure 30.

were still functioning at the time, nor how many are still functioning now. For the earliest generations, another limit is that they are at risk of reaching the end of their life cycle. Therefore, the argument is that the impact on the environment is null. Some sector actors have been working wit the Government of Rwanda to support incentive modifications to ensure that they only benefit BEVs. Kenya solved that problem by banning the import of cars over five years old.

The positive outcome is that these used hybrid vehicles are cheaper to buy than new electric ones, and even cheaper than used fossil fueled cars, as those do not benefit from the reduced price. In that way, incentives open the car market to a new, small, but existing portion of the population. New BEV are less expensive thanks to tax cuts, but they are still only affordable to the wealthiest part of the population (cheapest model is 20 million FRW, so around 14,000 EUR). This cohort of the population has no interest in low-priced models because cars are prestige items. Our discussions with car sellers have confirmed to us that the most popular EV models are the most expensive ones.

Over a total fleet of 145,000 cars, the evolution is still very limited, especially when taking into consideration the ambitious targets the government announced in 2021. For cars, the objective is that 8% of the total fleet is electric by 2030. Today, they represent 0.25%, 3% with hybrids. However, the target of 25% of taxis and 30% of two-wheelers being electric by 2030 seem achievable. Sector actors estimate that 20% of the motorcycles in

Kigali are electric (about 4,000 out of 20,000 motorbikes). The government policy and incentive framework has helped companies develop their business in the country. Ampersand is the leader, with a fleet of more than 2,000 e-motorcycles and 27 swapping stations scattered in Kigali. Other companies like Spiro and REM are following in the hundreds. In 2020, Ampersand had 35 motorcycles and four swapping stations (MININFRA, 2021).

This growth has been made possible thanks to the micro- financing options offered by private companies. Bboxx estimates that 70% of the taxi drivers that bought an electric motorcycle did so with a micro-financing scheme, and that most of the 30% left are bought directly by the financing companies to be leased to customers. Watu, another actor in that field is financing 900 e-motorcycles in Kigali. This shows that the government is not the only actor interested in incentivising the EV transition. Private actors have found a way to solve the affordability challenge on the two-wheeler segment. An Ampersand bike costs 2.1 million FRW, but owners are not required to pay any down payment. Instead, they pay a weekly fee. The two financing companies we contacted offer rates around 35,000 to 40,000 FRW. This is around 25 EUR paid every week, during one and a half to two years.

The waitlist to acquire an e-motorcycle is very long as companies lack funding to grow fast enough to match it. This means that the market has the potential to grow even faster.

When it comes to retrofitting, the model has been shown to be uncompetitive, as one limit is the age of the motorcycles.

It proved more interesting to pay more for new e-motorcycles than to invest in a retrofitted motorcycle that would soon reach the end of its lifecycle. Only 84 have been retrofitted since the programme was created.

Charging Incentives

Charging infrastructure policies need to accompany subsidies and financial incentives for them to be truly effective. These policies are more sustainable than subsidies alone, which are very expensive to maintain over a long period.

In China, the evolution of these sustainable policies has closely aligned with the development trajectory of the EV market. Following the release of the “Notice on the Construction Reward for New Energy Vehicle Charging Facilities” in 2014 and the “Electric Vehicle Charging Infrastructure Development Guide (2015-2020)” in 2015, significant investments have been directed towards the charging infrastructure sector. Between 2015 and 2018, the number of charging stations grew rapidly, corresponding to a surge in China’s EV sales. After 2018, despite the reduction

in subsidies, the focus of policies related to charging facilities shifted from quantity to quality. Various supporting standards, operational management, and service standards were successively introduced. In March 2020, in the government work report, charging stations were included in the “new infrastructure” initiative, becoming one of the seven major industries. In the same year, the “New Energy Vehicle Industry Development Plan (2021- 2035)” was released. As of June 2023, the total number of charging infrastructure units nationwide reached 6.652 million, a yearon-year increase of 69.8%. The total installed capacity of public charging piles in China has reached 56,000 megawatts (ICCT, 2024). While China’s EV industry is gradually transitioning back to market mechanisms, the continuous improvement of charging facilities remains an effective stimulus for the growth of the EV market.

Although support for charging infrastructure construction is an important part of non-financial incentives and effective incentives for incentivising consumers, it is a challenge for governments. For governments of developing countries, for example Brazil, there is no plan to implement financial support for public charging points due to limited public finance, the domestic political situation, and economic recession. In short, the effectiveness of incentives not only depends on incentives themselves but also the public finance situation and the developing planning of governments. In terms of incentives regarding charging fees, there is a difference between home charging and public charging. Home charging is preferred by EV owners over public charging according to our survey in Shanghai, while incentives for it have proven to be highly effective. Now Shanghai’s home charging facilities follow residential electricity pricing which is lower than commercial electricity pricing used by public chargers. The lower cost of home charging is one of the main reasons for consumers to buy an electric vehicle as it reduces the operating expenses of electric vehicles, making them cheaper in the long run compared to ICEVs which require increasingly costly fuel.

Chinese consumers prefer private chargers to public ones, and a study in Shanghai suggested that less than half of EV owners in the city use public chargers outside of their workplaces (Peng & Bai, 2023). Thus, currently home charging fee reduction is increasingly considered by consumers and becoming effective and convincing among all incentives in Shanghai. It can be said that consumers are more sensitive to price and value for money,

and direct reductions in expenses prove to be the most effective incentive policies. Charging subsidies for public chargers are less effective, according to our case study in Shanghai. Although the number of public chargers has rapidly increased in the past years, the existing public infrastructure might not be sufficient according to EV users’ perception.

Figure 31.

EV sales and Number of Public Piles in China with Policies (2010-2023)

Source: (China Electric Vehicle Charging Infrastructure Promotion Alliance, 2024; IEA, 2024a).

One incentive proposed by the Rwandan government is the eligibility of charging stations to an industrial tariff for electricity. Unlike residential tariff which increases proportionally to consumption, or commercial tariff, the industrial tariff proposed by the Rwanda Energy Group (REG) is inversely proportional to consumption. This is especially advantageous for the battery-swap stations that supply the taxi e-motorcycle fleet. Already at more attractive prices compared to fossil fuel, the gain is at the benefit of the taxi drivers.

Depending on the companies, one full recharge can cost between 1,200 and 2,100 FRW (0.80 to 1.50 EUR). If the majority of the stations recharge on site, REM has another operation model and recharges all batteries at a central station before dispatching them to their network of swapping points.

After conversing with actors of the sector however, the application of the industrial tariff can be a long process for the station operators. One challenge for companies is that the construction of charging stations, which can be expensive, especially as the construction of a transformer can be required, is not subsidized by the government.

Essential for the democratisation of an EV fleet in the country, the development of the charging network is today concentrated in the city of Kigali, where it is the most profitable.

License Plate Allocation

Along with these incentive policies, license plate regulation which is unique in the Chinese context has played an important role in local EV market development. Since the 1990s, restrictions on private car purchasing and driving have been implemented in Chinese cities to alleviate traffic congestion and air pollution. Thus, local incentives that provide priorities of private car purchasing and driving are effective for encouraging consumers to buy electric vehicles. According to current policies in Shanghai, the city where we conducted fieldwork, there is regulation of obtaining a local license plate, as well as an auction-based mechanism for a new license plate, with an average cost of around 90,000 CNY (11,842 EUR) in 2023. Lu et al. found that EV sales would increase by 56%–65% if the price differential between ICEV and EV license plate costs rose by 1,000 CNY (132 EUR) in Shanghai (Li et al., 2023). A similar policy in Beijing restricts the number of private cars’ license plates. Existing research indicates that increasing the license plate quota could promote EV diffusion by raising its market share from 7.6% to 9.18% in Beijing (Zhu et al., 2023).

License policy is the most effective incentive, which is proven by our case study in Shanghai. Based on the research in Shanghai in 2022, incentive policies were classified into eight types: free license plate, purchase rebate, tax reduction, home charging fee reduction, access to viaduct highway, adequate public charger points, private charger installation, used-EV transaction policy, and charging subsidy for public chargers (Peng & Bai, 2023).

Usage Incentives

Under strict access restrictions and license schemes, usage incentives for EVs in China have proven highly effective. Due to the difficulty of obtaining local licenses, many car owners in Shanghai chose to use non-local licenses. However, a new policy introduced in 2020 stipulates that from 7:00 to 20:00 on weekdays, small passenger vehicles with out-of-province plates, temporary license plates, unoccupied taxis, and learner drivers are prohibited from using certain major viaduct highways and tunnels in Shanghai.

Furthermore, since 2021, the city’s inner ring road has restricted access for vehicles with non-local plates (Shanghai Huangpu, 2021). This policy has affected the daily travel of owners with non-local plates, encouraging them to switch to NEVs to quickly and affordably obtain a local license plate. Since the introduction of the new ‘access restriction’ policy, the sales of NEVs in Shanghai have surged. In six months, the city saw NEV sales surpass 132,000 units, a significant increase of 3.5 times year-on-year. This figure exceeds the total NEV sales for the entire year of 2020 by 3% (Peng, 2021). It can be said that the combination of the restricted access policy and the license plate policy has effectively driven the transition of Shanghai’s automobile market towards electric vehicles.

Brand Incentives and Consumer Strategies

The brand strategy of creating a community in China is very prominent. They promote community and brand loyalty through brand-backed activities and customer exclusive venues. This approach not only increases the benefits and identity recognition consumers gain after purchasing an electric vehicle but also serves as an incentive for choosing a specific brand. Another crucial aspect that brands play on in China is the integration of EVs within a broader IoT network, connecting them with consumers’ phones and homes, as well as including many kinds of special features that are sought after by Chinese consumers. Although these features may not be the primary motivation for choosing an EV over an ICE car, they can influence consumers’ preference for specific brands.

More importantly, brand incentives primarily include direct price reductions, free charging stations and charging credits, and complimentary warranties. Price reductions are particularly attention- grabbing and sensitive for consumers, making them more likely to be attracted to the idea of buying a new car to get an EV. These brands have effectively taken over from government incentives after they ended in 2022, competing against each other on different aspects to emerge as leaders of the market. This leads to an interesting situation for consumers where prices are decreasing, features in cars are improving, and customer service is getting better as brands try to attract more clients to choose them over their competitors. This competition is even directly visible in Chinese shopping malls, where many different EV brands face each other in dedicated parts of the mall, showcasing large signs with the advantages of choosing their cars.

Effectiveness of Education

Our survey revealed that education about EV technology significantly reduces barriers to adoption. In Europe and other regions, there are still widespread fears about the maturity of the technology among most of the population. However, our respondents in Shanghai exhibited a different perspective. Only 44% of them believed that the technology was not mature enough, indicating a higher level of confidence and awareness about EV technology in China. Furthermore, among the five types of inconveniences associated with EVs, concerns about technological maturity ranked only fourth for Shanghai respondents. A survey done in 2018 in China also indicates that knowledge about EVs had a positive effect on consumer’s intention to adopt EVs (S. Wang et al., 2018).

This finding highlights the positive impact of education and awareness campaigns on public perception. By addressing common misconceptions and providing accurate information about the advancements in EV technology, it is possible to alleviate fears and increase acceptance. This suggests that similar educational efforts in other regions could play a crucial role in accelerating the adoption of EVs. This is especially interesting, given the fact that people’s attitude toward technology has rapidly changed.

China’s EV market has grown rapidly thanks to the government’s commitment to an electric transition, as well as its advanced battery and automotive technologies, its well-developed industrial chain, and the strategic transformation initiatives

piloted by Chinese companies. Incentives like purchase subsidies, free/cheap home charger installation, free charging quota from brands have a significant impact on consumers. Meanwhile, EV brands place great emphasis on cultivating user communities. In the context of China, the brand image and user loyalty established through interpersonal networks and communities have expanded the market for electric vehicles.

Anti-ICEV Policies

Anti-ICEV policies have been implemented in many countries around the world to force the transition. In China, the purchase tax on ICEVs is one form of anti-ICEV policy designed to encourage consumers to buy an electric vehicle. The effectiveness of these incentives in promoting EV adoption has been very limited. Since 2017, at the same time as it gradually phased out of subsidies for BEVs, China began to increase the purchase tax rate for ICEVs (Ji et al., 2022). Currently, the purchase tax rate for ICEVs is 10%, while NEVs enjoy a tax exemption policy. However, such an anti-ICEV incentive showed less effectiveness, according to research from Ji et al. (2022). They found that the degree of substitution between ICEVs and BEVs in China was low, and that the increase in purchase tax rate for ICEVs did not promote BEV sales substantially, as the tax rate was too low to properly deter ICEV customers. However, they can be effective in increasing tax revenues to finance subsidies and incentive policies for EVs.

Another kind of anti-ICEV policy in China, the policy restricting the use of fuel-powered vehicles, has influenced consumer choices to some extent. However, this policy has only been piloted in certain cities and has not been implemented nationwide.

4.4. RANKING INCENTIVE EFFECTIVENESS

Ranking of incentives from our survey in China

After conducting an online questionnaire survey and several street interviews, we found that purchase rebates are the main reason why EV owners bought an electric car. The second reason is free license plates, followed by a lower electricity fee for home charging. As for those who would like to buy an electric vehicle in the future, the results are similar. In terms of feedback

from street interviews, free license plates and lower charging fees for home charging are most frequently mentioned reasons for choosing electric vehicles. The result is slightly different from Peng and Bai’s research. The figure above shows the overall ranking of the effectiveness of incentive policies in China. The root of this phenomenon lies in the fact that the policy of offering free licenses effectively reduces costs for car owners, equating to direct savings similar to purchase subsidies.

Researchers in Sweden have demonstrated that non- financial incentives can sometimes be more effective than financial ones. They found that the perceived value of free parking for EV users, known as the willingness to pay, was approximately 5,600 EUR. This means that EV users valued the benefit of free parking at this amount, which exceeded the EV subsidies provided by the Swedish government at the time - 4,300 EUR (Langbroek et al., 2016). In Chinese cities, a study conducted in 2017 during the early stages of the market revealed that financial subsidies were not the primary motivator for consumers to purchase an electric car; instead, they valued the convenience of driving an EV across the city (N. Wang et al., 2017). The ICCT also estimated the monetised benefits for EV users across various cities from EV incentives. These benefits are estimated to be the highest in cities with licensing schemes, at around 11,500 EUR (Jin et al., 2023). These benefits can sometimes even offset the price difference between ICEVs and EVs, thereby encouraging road users to make the switch. These measures are slightly more sustainable than financial incentives as they do not directly burden the government’s budget. However, they are not long-term solutions, as the convenience decreases with the increasing number of EV users. For instance, if a measure involves the use of bus lanes, as seen in European cities, it becomes ineffective and even detrimental to the public transportation system if too many people own EVs.

4.5. WHO BENEFITS FROM THE INCENTIVE >>>

While focusing on the stimulus policies themselves, it is also worth exploring which groups benefit from these policies and whether there are issues of inequality. Existing incentives aim to reduce the costs of having an electric vehicle, which includes purchase, license plate, maintenance, insurance, and charging costs. For low-income households, these costs may account for a large percentage of their daily expenditure and prevent them from buying electric cars.

Therefore, if policies can effectively help consumers overcome the cost barriers to purchasing EVs, they will successfully stimulate the growth of the electric vehicle market. Incentive policies have different effects on various groups. For instance, a study in the United States indicates that low-income families are the most likely to benefit from fuel cost savings and improved local air quality associated with plug-in electric vehicles (PEVs).

Additionally, because low-income households are more financially constrained, financial incentives can better help them overcome the initial cost barriers. However, since these incentive policies target all consumers, there is a free-rider problem where higher- income families who can afford to buy electric vehicles without subsidies also receive these benefits (Sheldon, 2022).

This means that when the government increases investment in subsidy policies, the effectiveness in stimulating the market does not increase proportionally.

By imposing certain standards and creating different kinds of incentives depending on specific EV characteristics, the Chinese incentive schemes were able to shape the market and the kind of models that manufacturers should produce. This also has implications for the kind of people that are targeted by EV incentives. Indeed, even on paper, policies are not targeting specific groups and are aiming at the broadest EV adoption possible across the population, by pushing for EVs with larger batteries and subsidising them at a higher level for both consumers and manufacturers, these policies are promoting more expensive models, that might not be accessible for less well-off parts of the population.

According to data from 2022, the minimum monthly wage standard in Shanghai was set at 2,590 CNY—341 EUR— with a minimum annual income of 31,080 CNY—4,092 EUR—(Labor Relations Department of China, 2022). Meanwhile, the per capita disposable annual income of residents in Shanghai was 84,834 CNY—11,162 EUR—in 2023 (Shanghai Statistics Bureau, 2024). Our survey results suggest that the majority of EV owners’ annual income is more than 100,000 CNY—13,158 EUR. At the national level, middle and low-income groups are those who earn less than 18,446 CNY—2,427 EUR—a year (Finance Magazine, 2023). Thus, even with subsidies, electric vehicles are still expensive for low-income people in China.

Therefore, we find that China’s purchasing incentive policies have not covered all socio-economic groups, as electric vehicles are still unaffordable for middle and low-income residents.

The direction that the EV transition has taken in Rwanda is affecting different population groups in different ways. Tax incentives have not significantly impacted new BEVs within the four-wheel segment, as their starting market price is often too expensive for most potential buyers.

A consumer preference for larger ‘statement’ vehicles also prices out potential first-time entrants to the automobile market.

While this may indicate that incentives on new-to-market BEVs are mostly benefiting corporate and NGO fleets, alongside wealthier car owners. The same cannot be said about hybrids, which have been imported to Rwanda since 2021.

While exact figures are known only to the Rwanda Revenue Agency (RRA), our research in Kigali indicated that these used vehicles make up most of the the country’s incentive- affected EV and hybrid vehicle boom. At the same time, those who bought these vehicles tend to be more middle-class or first-time vehicle buyers and are enticed by the low cost of owning a used hybrid vehicle.

While this report has already developed some of the negative environmental effects that could be attributed to the mass importation of incentive-led hybrid vehicles, our field research in Rwanda also brought to light some potential macroeconomic considerations as well. In particular, the aforementioned inclusion of unlicensed parallel importers in Rwanda’s incentive schemes has allowed for the proliferation of used hybrid vehicles to be imported from low-cost international vehicle distributors based in Dubai.

While this may have led to more middleclass families purchasing their first car in the short term, in the long run, policymakers and researchers need to examine how such moves may affect the purchasing power of all those seeking to enter the vehicle market.

This is the case as Rwanda has experienced near-record levels of inflation in recent years, something which many of those we talked to in Kigali identified as being— in part—linked to domestic currencies, leaving the country to finance the purchases of vehicles through incentive-enabled parallel importers (Mutetijabiro, 2024).

Research from the World Economic Forum (WEF) has also identified how, in other African countries, the import of used vehicles can replicate findings from Rwanda, where purchasing costs are reduced, alongside potential consumers’ purchasing power (Munyati et al., 2021).

In the two-wheel vehicle segment, the incentives have benefited the moto-taxi drivers, who represent most motorcycle users in Kigali. Micro-financing schemes have allowed drivers to switch their motorcycles to electric models, and because their revenue depends on the difference between the income they get from customers and the price of refueling, both the switch to battery vehicles and the industrial tariff applied to electricity have increased the available income after a day’s work. The impact of this economic model is visible when compared to the automobile taxi fleet, which is made up— for the most part—of decades-old ICEVs.

In a more general way, the whole population is benefiting from the fast transition of the motorcycle fleet to EVs, as this has a direct impact on pollution levels and noise. As taxi drivers carry out a high number of road journeys, it makes sense for the transition to start with them.

4.6. PUBLIC ACCEPTANCE OF EV INCENTIVES >>>

The effectiveness of incentives in getting consumers to switch to electric vehicles also needs to be linked with public acceptance of such measures. On paper, some policies like anti-ICEV programs are the most effective policies for organising the switch. If road users can no longer use their car where they live or if there are no more ICEVs on the market, people will have to switch to a form of low-emission vehicles. However, it does mean that these policies are good for organising a seamless and perennial switch to EVs. These policies are coercing people into change while consumers do not like to be forced into a decision. This is also why incentive policies can succeed: as they are trying to nudge people to choose, not impose them. For example, the ban on ICEV in Europe is controversial amongst road users, especially those worried that they might not be able to switch to EVs before then. Public opinion polling from France, Germany, and Poland noted that the ICEV ban V was the least popular environmental measure implemented in each country (Abou-Chadi et al., 2024). These kinds of policies have a risk of creating political tensions and backlash from the population. On the other hand, non- restrictive policies that increase driving convenience for EV users are much more welcomed as they create benefits without negatively impacting existing users. These measures are much more well-accepted and are considered to be convenient and easier.

4.7. INCENTIVES:

FIRST STEP FOR EV MARKET GROWTH

For different countries and regions, the necessary incentive policies vary. Markets in the initial stages require financial incentives the most, encouraging consumers to purchase electric vehicles by reducing prices and taxes. Additionally, the widespread availability of charging infrastructure is crucial for the long-term development of the electric vehicle market, which also requires government support.

China’s experience demonstrates that as the EV market matures, incentive policies and government interventions can gradually be phased out, returning to market mechanisms. Currently, the space for financial incentives is very limited, and the incentive policies should gradually withdraw from directly intervening in industry development.

In Rwanda, the stakes of the incentives are not only aimed at growing the demand for EVs but also at growing their supply. By lowering import taxes, Rwanda’s goal is to nourish an environment readyfor EV companies to settle. And prices are not the only tool. Rwanda is a small country, which is a valuable condition as it allows flexibility in the market, openness and readiness to actively collaborate with these settling companies. In emerging EV markets, the incentives need to push both sides of the market to give it momentum. The limit to that is the extent to which governments can finance this push.

Although we have discussed the effectiveness of EV incentives in detail, it is not easy to identify the exact influence of each incentive as policies are often implemented in a combined form within a fluid market. Because socio-economic development situations differ by region, the overall situation of a country and the specific conditions in various cities should also be discussed separately.

Meanwhile, the psychological values of consumers play a critical role in the effectiveness of EV incentives. According to our survey in Shanghai, concerns about the safety, brand recognition, and ease of use of electric vehicles persist among consumers, especially the older generation.

Moreover, it is hard to evaluate the effectiveness of these policies as they can have different effects on different groups of consumers and where they are in the process of getting an EV.

People who were already considering buying an EV will be more easily attracted by the prospects of buying an EV through incentive schemes; they would already be more aware of the availability of these than people who are in a “pre-contemplation stage” where they have not yet considered a change for an electric vehicle. In that sense, it is hard to know if the people in the first scenario would have bought an EV even without incentive schemes since they were already considering it (Langbroek et al., 2016).

Moreover, basing effectiveness on statements from users who have already bought an EV is difficult since it might be a case of post-purchase rationalisation bias, where the consumer is trying to rationally explain the reasons that pushed them after purchase to buy something when these reasons might not have been on their mind before. It is thus hard to decipher the real motivations behind choosing a particular EV.

KEY TAKEAWAYS

• Purchase incentives are very important initially as they can significantly reduce the price and rapidly increase sales; however, they need to be accompanied by charging infrastructure policies to increase convenience.

• While purchase subsidies can jumpstart EV adoption, their effectiveness diminishes over time. China shows that when mature enough, the market can continue to grow without subsidies.

• Fully abandoning subsidies can be a drawback to EV adoption by low-income households, for whom the price of a new car remains too high today and who turn toward older ICEV models on the secondhand market.

• Offering tax breaks on EV purchases or ownership can provide ongoing benefits to consumers and incentivise long-term EV ownership without being too costly for governments.

• China’s well-developed charging infrastructure network, especially in major cities, highlights the crucial role of infrastructure in overcoming “range anxiety.”

• Rwanda’s lack of financing in addition to existing incentives for building charging stations is making their development difficult outside the capital.

• The lack of controls on unlicensed parallel importers may be leading to greater rates of inflation and lower purchasing power.

• Financing and loan options in Rwanda make EVs more affordable by addressing upfront cost concerns and aligning the weekly payment with what the customers – here the taxi drivers – can afford. It has been very successful, as since 2019 the e-motorcycle fleet in Kigali grew from non- existent to more than 4,000, out of an estimated total of 20,000.

• Incentives that increase the driving convenience of road users can be more effective than subsidies, especially after the market is established and the prices have decreased. They are also better appreciated by users.

• The most effective incentive in Shanghai is the licensing scheme, which reduces both ownership price and allows for more freedom when driving in the city. It was the most self-reported push for them to switch from an ICEV to an EV. This shows that incentives that decrease overall cost of ownership for EVs compared to ICEVs are very effective.

• In China’s EV market, strong brand strategies emphasising community building, targeted features, and competitive incentives have emerged as a powerful driver of consumer choice and price reduction.

• Educating consumers about EV technology’s advancements can significantly reduce adoption barriers, paving the way for wider EV acceptance, as demonstrated by China’s experience.

• Anti-ICEV policies can be effective when they are forcing the switch, but they can be poorly received by the public. Taxing ICEVs can finance the transition.

POLICY TRANSFER 05

The global expansion of electric vehicles and government incentives to promote their adoption has occurred within both domestic automobile markets, and their international policy and production counterparts. As early leaders—at the national stage—in adopting electric vehicles have begun to rethink their incentive strategies, newcomers on the global stage have followed in their footsteps, often with similar public policies. The next section of our report will address the notion of ‘transferability’ of public policies or ‘policy transfer’ from one market to another, how future governments and states can learn from peers, and what the future of policy transfer and development looks like in our two case studies of China and Rwanda.

5.1. DEFINITION OF ‘POLICY TRANSFER‘

Broadly speaking, the notion of ‘policy transfer’ can be defined as instances where policy decisions are spread “across units based upon at least some knowledge of policy elsewhere” (Wolman, 2009, p. 2). In the case of electric vehicle incentives, this can be observed as countries that seek to develop a domestic electric vehicle market look abroad to learn from peer countries that already have a developed market.

A global example of this can be seen within the European Union (EU), where many individual member states—such as France, Germany, Italy, and Spain—have adopted similar e-mobility and incentives policies to one another, all of which share a similar conceptual framework (Begley et al., 2016). While policy transfer is in itself a unique occurrence, our report treats it as part of a larger phenomenon of knowledge transfer and dissemination.

Other similar policy occurrences include “policy diffusion”, “policy innovation,” and “knowledge utilisation” (Wolman, 2009). While each of these occurrences is somewhat unique from each other, they often share many of the same elements. As a result, our report will group them together under the aforementioned heading of ‘policy transfers.’

It is also important to remember that while policy transfer and diffusion are often thought to occur at the governmental level—whether that be within national, provincial/state, or municipal agencies—it also occurs within both the private sector and among non-governmental organisations. With Rwanda seeking to market itself as a “proof-of-concept” nation in the technology and development sectors (Republic of Rwanda, 2020), it is critical to understand how the operations of private corporations based in the country not only benefit from existing incentives and infrastructure to operate within Rwanda and to seek new business development opportunities outside the country. These three policy and business domains will be further expanded upon in our country-specific case studies.

Finally, while our notions of ‘policy transfer’ and ‘transferability’ are particularly focused on communicating policy and knowledge between agencies in two or multiple jurisdictions, it is also imperative to reflect on how policy ideals and knowledge are disseminated between agencies within one specific administrative region. As was previously discussed in our section on the ‘state of incentives’ in Rwanda, the development of fiscal incentives—including the elimination of VAT and import duties—on electric vehicles was developed and spearheaded by multiple agencies within the Government of Rwanda (Rwandan Ministry of Infrastructure, 2021). This included the Rwandan Development Board (RDB)—which proposed the development of EV incentives in Rwanda—the Ministry of Infrastructure (MININFRA)—which formalized their proposals into legislation— and the Rwanda Revenue Agency (RRA)— which is responsible for the collection of VAT and import duties on automobile purchases in the country.

5.2. RWANDA: POLICY TRANSFER AT THE NATIONAL AND CORPORATE LEVELS >>>

In the Rwandan case study, electric vehicle incentive policy transfer occurred not only within governmental institutions and policymaking apparatuses but also in private sector enterprises and non-governmental organisations operating within the country. We will tackle each market segment separately to understand how the country’s current policy and economic structures have contributed to spreading policy knowledge, incentive structures, and organisational operations beyond its borders to neighboring countries throughout the East African Community (EAC).

From a governmental policy perspective, the introduction of electric vehicle incentives in Rwanda— on both two and fourwheeled vehicles—has also informed public policymakers in nearby EAC countries. The most notable example of such is Kenya, where the government initially copied Rwanda’s purchasing incentives by eliminating VAT sales taxes and import duties on electric vehicles entering the market. It should also be noted that Rwanda’s elimination of electric vehicle fees could be considered somewhat ‘laissez-faire’ and applied to all types of electric and hybrid vehicles entering the market—no matter their year or production location.

Kenya’s ‘reformulated’ incentive model stressed the need to ensure some vehicles were assembled locally and limited purchasing incentives for older- model EVs and hybrids entering the country (Africa Energy Portal, 2023). The country’s national energy supplier—Kenya Power—and price regulator also followed its Rwandan counterparts in the development of lower-cost electricity tariffs for e-mobility companies (AfEMA, 2023). The common policy desire to reduce fuel costs and both countries’ reliance on foreign oil and gas imports should also be seen as an enabling tool of this policy transfer process.

Like the Rwandan case, preliminary data shows an increase in the number of electric vehicles that have entered the Kenyan market since the introduction of purchasing incentives (AfEMA, n.d.). This is particularly the case for e-motorcycles, which saw a doubling—from 1,500 to 3,235—in the number of vehicles on the road from August to December 2023 (Ibid.). This growth in the size of Kenya’s electric vehicle fleets indicates the potential effectiveness of the policy transfer process between Rwanda and Kenya.

The potential of upcoming legislative and policy changes to eliminate tax incentives and introduce charges on the import of large-scale batteries into the country may also reverse any progress that was made (Siele, 2024). That being said, the Kenyan government’s reversal on EV subsidies also highlights the need for developing countries to increase their tax revenues in order to fund future “development projects” (Ibid.) which as the ‘end-markets’ for vehicle fleets— including EVs—may ultimately mean investing in sustainable battery recycling facilities.

Numerous e-mobility and financing companies within the private sector have grown out of the country’s favorable business environment to become leading business actors throughout the East African Community (EAC). During our field research in Kigali, we met with stakeholders from Ampersand Rwanda Ltd., Bboxx Ltd., and Ox Rwanda Ltd. These e-mobility-related companies are currently headquartered or were founded in Rwanda and have operations throughout the EAC and the continent at large.

Each identified Rwanda as a “proof-ofconcept country” (D. Idunnuoluwa, personal communication, 17 May 2024) where companies could trial their product in the country, and if it succeeded, they would have a strong footing to expand their operations in geographically larger and more complex economies throughout the continent.

Ampersand provides the ideal business case study for this, as it has expanded its operations into Kenya and is also looking at developing an e-moto-taxi market in Uganda (Bizimungu, 2024). Furthermore, this notion is strongly promoted by the country’s current government, as it seeks to attract outside e-mobility investors into the country.

Finally, the role of international non-governmental organisations (NGOs) in developing an EV market in Rwanda should be viewed as a form of policy transfer from one jurisdiction to another. The aforementioned Ox Rwanda Ltd. is an offshoot of the international NGO The Global Vehicle Trust, which seeks to provide affordable mobility solutions to low-income farmers and laborers in developing countries.

Similarly, as noted in our meetings with EV car dealers in Kigali, many foreign NGOs have begun to shift parts of their automotive fleets to more sustainable fuel sources as a result of international directives and environmental commitments.

5.3. CHINA: LIMITED

OPPORTUNITIES FOR POLICY TRANSFERABILITY

China’s policy successfully increased the place played by electric vehicles in its car market, and it is logical to ask ourselves if this policy could eventually be replicated in other markets. Prof. Ning Wang (personal communication, 9 May 2024) expressed his opinion about this possibility.

China’s approach involved significant financial investment in EV incentives, contributing to the development of the EV industry and the cultivation of consumer groups. The country’s success was also made by an incomparable industrial capacity that has reached a high degree of maturity, the innovation and advancement in key technological fields, and an open market environment, which facilitates the emergence of local players on the market.

Despite the unique circumstances that facilitated China’s rise in this sector, its efforts in promoting electrification, constructing charging infrastructure, and subsidising EV consumers are worth emulating by other countries or regions. Other studies also suggest that localised factors such as the composition of local electricity generation, transportation infrastructure, and public awareness of environmental issues contribute to the complexity of assessing the capacity for copying effective incentive schemes for EVs from one market to another (Hardman, 2019).

Consequently, we cannot say that a particular policy is perfectly replicable everywhere, but policymakers must tailor incentive strategies based on national contexts.

Even if it is complicated for other countries to replicate the same level of success without similar resources, countries like India and Vietnam are attempting to emulate China’s strategy by developing their own local EV brands. In India, for example, Tata and Maruti are currently dominating the car market and are trying to keep their competitive advantages by developing EV models and avoiding a surge of too many Chinese cars on the market. Other countries are hoping for a similar impact of opening local factories manufacturing foreign EV brands or batteries to lower EV prices locally and encourage adoption. However, the effectiveness of these strategies remains to be determined today and will require assessment in the coming years.

Nevertheless, this does not mean that no incentive policy developed in China is transferable to other markets. China’s deployment of non-financial incentive strategies can be an efficient alternative to expensive subsidy schemes for countries that have not yet managed to reduce the share of ICEVs on their roads and have limited financial capacities to develop efficient purchase or charging incentives. This is notably the case of non-financial incentives that significantly increase road users’ satisfaction by making driving an electric car more convenient than an ICEV.

5.4. TRANSFERABILITY TO OTHER TYPES OF TECHNOLOGIES

While this report has focused on understanding the role of incentives in the growth of the electric vehicle market across different global markets, it should be noted that many of these incentives—which were designed for EVs—could also be applied to other sustainable fuel forms. These include biofuels, carbon-based e-fuels, and hydrogen-powered vehicles, which may represent a greater share of the automotive market in the future. Given the FIA’s policy preference for ‘technological neutrality’ in the fight against climate change, our research highlights how certain —technology-neutral— incentives could be re-designed and applied to other future renewable fuel forms (FIA Region I, 2021). These include select purchasing incentives and licensing incentives, as well as brand-related incentives determined by automobile manufacturers.

That being said, given Shell’s recent withdrawal from the personal vehicle hydrogen fuel market in the United States, policymakers must do their due diligence in ensuring that incentives are not improperly spent on unproven or unsustainable technologies (Martin, 2024).

KEY TAKEAWAYS

Overall, our research indicates that the policy transfer process for electric vehicle incentives is less fluid in the public policy realm than in the private and NGO sectors. While this varies heavily depending on a country’s political and economic comitment to pursuing the electrification of their vehicle fleets, our findings highlight that:

• Within private and NGO sectors, the Rwandan Government has effectively capitalised on its “proofof-concept” moniker as e-mobility organisations based in the country have expanded throughout the continent.

• Rwanda’s public policies have been exported to neighbouring EAC countries with similar success. However, their long-term political sustainability and support are undetermined.

• China’s unique manufacturing capabilities have a role in local EV growth, making it difficult to envision an exact policy transfer to other developing markets.

• However, individual measures can be transferred or used to inspire other policies. This is especially true for those which increase road users’ driving convenience. This can be done at a lower cost than strong subsidy policies.

• Some developing markets are still trying to replicate part of the Chinese industrial policy to increase EV adoption locally. However, this is still at an early stage, and their effectiveness cannot yet be estimated.

• The development of the EV market in developing countries can also be attributed to the global growth of Chinese electric vehicle brands such as BYD or Wuling. This highlights the power of the country’s corporate policy transfer apparatus.

• Incentives developed to promote the adoption of EVs may also experience similar degrees of success when applied to other vehicles powered by other sustainable fuel sources.

CONCLUSION

In conclusion, our research presents a complicated and yet important view on the role of incentives. The need for certain EV changes as different stages of development of EV markets and the challenges they are facing. Thus, the conclusions we draw about how effective they are in overcoming these challenges depend on this evolution stage.

ON KICK-STARTING AN EV MARKET THROUGH INCENTIVES

• Pushing for domestic EV production and developing financial subsidies for EVs can be effective for kick-starting the market as they allow for a significant decrease in price, one of the main barriers that exists today. This was the case for China.

• Nevertheless, the maturity and size of China’s industry and the country’s financial capacity make it a unique case that is not perfectly replicable for others.

• The role of industrial policymaking in China’s adoption of EV incentives was essential in kick-starting its market, along with robust subsidies and charging incentives.

• In the case of limited financial capacities to finance subsidies, individual policies that increase driving convenience for road users can be transferable at a lower cost than strong subsidy policies, while remaining quite effective.

• Other strategies like Rwandan public policies, including financing and loan options on EVs, are also easily transferable to kick-start a market even if long-term political sustainability and support is undetermined.

• The lack of a secondhand EV market remains a considerable barrier to global EV adoption that cannot necessarily be fixed through incentives but should develop by itself as worldwide EV stock grows and ages. This will be of great help for both developed and undeveloped EV markets.

• In developing regions, electric two-wheelers are emerging as a promising alternative to gasoline-powered vehicles, particularly in countries with lower car penetration rates like Rwanda.

ON DEVELOPING AN EV MARKET THROUGH INCENTIVES

• Strong anti-ICEV policies are effective as they are forcing the switch, but they can be unpopular. Taxing ICEVs at a low rate is not effective enough to promote a real switch to EVs, however it can increase tax revenue to finance other incentives.

• Incentives that increase the driving convenience of road users or that decrease the cost of ownership, like free licenses, are better received by road users and can be more effective than subsidies, especially after the market is established and the prices have started decreasing.

• Educating consumers about EV technology’s advancements can significantly reduce adoption barriers, paving the way for wider EV acceptance.

• Reducing purchase prices is essential but not enough to truly develop an EV market. To be truly effective, subsidies and other financial incentives need to be accompanied by charging infrastructure policies to increase convenience.

• While purchase subsidies can jumpstart EV adoption, their effectiveness diminishes over time. They are not long-lasting strategies and phase-out plans need to be included in initial strategy development.

ON GETTING OUT OF INCENTIVE SCHEMES

• Once the market is mature enough, with a strong competition between actors, it is possible to successfully pull-out of financial incentives. Cities can take over with their own subsidies, charging and usage incentives to make driving more convenient for EV users.

• When EVs become too prominent, there is also a need to pull out of these non-financial incentive schemes as the benefits gained from them decrease with an increase in EVs on the roads.

• Once governmental subsidies are abolished, market dynamics prevail and EV brands can set up their own financial incentives, as well as community-based strategies to promote their cars.

• Strong brand strategies emphasizing community building, targeted features, and competitive incentives can then emerge and act as a powerful driver of consumer choice and price reduction.

• Incentives developed to promote the adoption of EVs may also experience similar degrees of success when applied to other vehicles powered by other sustainable fuel sources.

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Differences between BEV, PHEV and HEV, as stated by the FIA.

Research from the European Parliament on EU import of Chinese electric vehicles

Press release from the European Commission regarding the Chinese subsidies Follow-up from the October 2023 paper from the European Parliament.

12 June 2024

This report is a major evolution of the approach of incentives in Europe.

Questionnaire to the Shanghai population (102 total respondents: 45 BEV owners, 33 ICEV owners, 10 hybrid owners, 18 respondents without cars) Questionnaire Introduction and Usage Disclosure

Dear Participant,

Thank you for taking the time to participate in our survey. This survey aims to understand your intentions regarding the purchase and use of electric vehicles, as well as your attitudes and opinions about the electric vehicle market. Your feedback is crucial for us to understand market demands and policies.

All the information you provide will be kept strictly confidential and will only be used for the purposes of this survey. We will adhere to relevant laws and regulations to protect your personal information. Your participation is entirely voluntary, and you can choose to withdraw from the survey at any time without any repercussions. Please answer the questions truthfully, expressing your genuine opinions and views. Please try to provide accurate and specific answers to each question. If you feel confused or have any questions about any part of the survey, please feel free to contact us, and we will be happy to assist you.

We welcome participants from various backgrounds and experiences. Your perspectives are vital to our research. Please express your views as objectively as possible so that we can obtain comprehensive data.

Finally, we sincerely thank you again for your participation and support. Your feedback and suggestions are extremely important to us and will help us better meet your needs and expectations. Thank you again.

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