The economics of electric vehicles for passenger transportation

Electric mobility has garnered growing interest and significant momentum across several major global markets often motivated by transportation sector decarbonisation. Together, Europe, China, and the United States account for more than 90 percent of the world’s electric vehicle fleet. For many OECD countries, electric mobility is seen primarily as a lever for transportation sector decarbonisation, given that many of the other relevant policy options have already been exhausted. As of today, electric mobility for passengers is a comparative rarity across low- and middle- income countries (LMICs). In some of the LMIC leading markets, such as Brazil, India, and Indonesia, electric vehicles account for less than 0.5 percent of total sales. There are signs that this situation is changing. Brazil, Chile, and India are leading the way in electrifying their bus fleets in their largest cities by introducing innovative financing practices and improved procurement practices. Battery swapping schemes are taking off in Asian and East African countries to lower the up-front cost of two- and three-wheelers. Original modeling for this report suggests that established global policy targets, such as 30 percent of new passenger vehicles to be electric by 2030, would make economic sense for many LMICs under a wide range of possible scenarios.