The sustainable mobility transition is not equitable. Here are three CEOs trying to close the gap

A worker walks next to assembled electric motorcycles at ARC Ride's warehouse in Industrial Area, Nairobi, Kenya November 2, 2022. REUTERS/Monicah Mwangi

Electric two-wheeler vehicles will be key to the mobility transition in emerging markets. Image: Reuters/Monicah Mwangi

Maya Ben Dror
Industry Manager, Automotive and New Mobility & Advanced Manufacturing, World Economic Forum
Jasmeet Khurana
Lead, Moving Emerging Markets, World Economic Forum, C4IR India
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  • Road mobility accounts for over a quarter of global carbon emissions, so its decarbonization is vital to mitigate the effects of climate change.
  • Emerging markets are willing to invest in local solutions, like increased adoption of electric two- and three-wheelers and local car manufacturing.
  • Three CEOs share approaches specific to sustainable mobility in India, Brazil and Africa that are worth exploring to accelerate the green transition.

Road mobility accounts for about a quarter of global energy-related carbon emissions and is increasing, so its decarbonization is critical for global climate crisis mitigation. Cars account for the largest portion of increasing emissions sources globally, making the transition to zero tailpipe emissions attractive, especially to electric vehicles (EVs) in developed markets.

It is no wonder that major developed markets committed to the phase out of internal combustion engine vehicles and EV value chains investments. Luckily, despite the backdrop of supply chain disruptions, geopolitical shocks, and high commodity and energy prices, electric vehicles sales (hybrid and pure) exceeded 10 million last year, up 55% relative to 2021.

However, not all markets can electrify their car fleets at the pace the climate crisis warrants. For several emerging markets, car ownership continues to be quite low, but sales are growing. There is a need to look at mobility holistically in order to take a more nuanced and collaborative approach.

China, Europe and US dominate EV sales

China, Europe and the United States accounted for about 95% of global electric car sales in 2022. Emerging and developing economies outside China account for only a fraction of global EV markets.

In many key emerging and developing economies, transport remains largely based on smaller mobility solutions in urban centres, such as two- and three-wheelers, and shared mobility for regional commutes.

In 2021, electric two- and three- wheelers accounted for one million barrels of oil demand displacement per day – 66% of the overall oil demand displacement by EVs in the year, making electrification of this segment more globally significant than many imagine.

Even in large car markets in the emerging world, governments find it more attractive to invest in assembly and manufacturing of vehicles and parts in which they can have a long-lasting relative advantage.

The World Economic Forum asked three CEOs and senior executives for their views on the challenge. Here’s what they said:

‘Energy transition in many emerging markets driven by electric two-wheeler adoption’

K N Radhakrishnan, Director & CEO, TVS Motor

Two-wheelers are the most important transport mode in several emerging markets across Asia and Africa, with India being the world’s largest two-wheeler market. The energy transition in mobility in many emerging markets, including India, is being led by electric two-wheeler adoption.

Led by electric two-wheelers sales, the accelerated pace of EV adoption in India industry volumes tripled in 2022, with growth continuing into 2023. This growth has been driven, in part, by the support extended in form of incentives from the Central and State governments in India.

The vision of accelerated EV adoption is being driven by the government and original equipment manufacturers (OEMs) are responding with investments in technology and building capacity to help realize this vision.

Apart from driving growth, during 2022-23, there were consistent policy and regulatory interventions by the government to ensure high quality and enhanced safety levels of electric two-wheelers for consumers.

This has led to the formalization of the industry, and the result is a product mix, that moved from low-quality, low-cost options, in favour of the offerings meeting quality and safety requirements.

The enhanced safety, localization and quality norms have a threefold impact. First, they enhance the quality of products received by the customers. Secondly, they aid the formalization of the sector, ensuring quality players. Thirdly, product quality is on par with global levels, enabling the industry to export overseas.

As for internal combustion engine two wheelers, in addition to India’s large domestic market, the country is also expected to emerge as a major hub for electric two-wheeler exports.

The heightened consumer interest in electric two-wheelers in India and across the emerging world, continues to be driven by the attractive total cost of operation and the technology proposition offer by EVs. This is made even more relevant with increasing fuel prices.

We expect the EV industry will grow rapidly as the consumer interest is buttressed with active policy support. Not only will electric two-wheelers provide low-cost mobility to millions in emerging markets, they will also be an important piece of the puzzle for clean cities, net-zero transport and energy security.

‘Tax incentives and stimulus schemes would accelerate decarbonization’

Daniel Randon, President, Randoncorp

The most challenging aspect for accelerating decarbonization of road transport in emerging markets is the lack of common understanding about local realities, which leads to two fundamental suggestions:

  • The creation of programmes to stimulate the development of new markets, in which companies are not present or where they are still not competitive enough.
  • The adoption of tax incentives to encourage local entrepreneurs to invest more aggressively in the development and transformation of products in this sustainable logic.

This would benefit not only the industrial chain, but also other chains such as infrastructure companies and associated services. Our experience in Brazil shows us that this is the most appropriate path.

This is not only because of Brazil's potential to lead the green economy, but also because of the level of adaptability that we can achieve, given the multiplicity of characteristics we have within the same country and the bureaucracy we still face.

Cars equipped with flex-fuel engines – which can run on both petrol and ethanol – have a strong presence in Brazil, for example. The potential for developing biofuels has also grown.

Have you read?

Another example is the electric auxiliary axle system that we developed at Randoncorp, together with partners and start-ups, which can reduce up to 25% of trucks' fossil fuel consumption. This solution also has the potential to be used in other heavy vehicles, such as buses or tractors.

This mechanism could have great application in South America and Africa, or even in countries in Central Asia, due to the very different relief conditions and poor infrastructure conditions, which may enable more intensive use of the auxiliary axle, thereby reducing other consumption harmful to nature.

This is just one of the technologies we created. We have also invested a lot in the design of automotive parts with lighter materials, such as composites, and with the application of niobium on a nanometric scale – a technology with an exclusive patent that improves the properties of countless materials, from paints to casting parts, among others.

‘2023 is a year of step change for the African automotive industry’

Dave Coffey, CEO, African Association of Automotive Manufacturers (AAAM)

Africa’s automotive sector is well poised for industrialization and growth. 2023 is a year of step change for the African automotive industry, with five hub countries – Ghana, Cote d’Ivoire, Nigeria, Egypt and Kenya –either implementing progressive automotive policies or due to approve and implement such policies.

Other African countries are exploring their competitive advantage. Up to now, only Morocco and South Africa have successfully and competitively industrialized their automotive industries with production volumes of around one million vehicles.

There is an understanding that not every country can assemble a vehicle – hub countries will assemble vehicles with neighbouring economies sharing in the value chain determined by their competitive and sustainable advantage – and much work is taking place on the ground to explore and develop value chains with regional collaboration key to driving scale.

The annual importation of 3 million to 5 million used cars into Africa, is an unregulated environment with many cars being unroadworthy and with outdated emission standards. A used vehicle ecosystem is key for affordable mobility, but the source will transition to vehicles assembled in Africa which will comply with minimum standards.

Discover

How is the World Economic Forum promoting sustainable and inclusive mobility systems?

The transition to new energy vehicles will depend on affordability and differ across mobility segments, with two- and three-wheelers setting the pace along with public transport in major cities.

Regulating the condition of imported used vehicles into Africa will also play a significant role in initially reducing carbon emissions. Effectively industrializing and growing the auto sector whilst providing affordable mobility is a huge employment opportunity for the continent.

AAAM, the African Continental Free Trade Area (AfCFTA) Secretariat, the African Union Commission, United Nations Economic Commission for Africa, Afreximbank and African Organisation for Standardisation have developed an auto strategy for the continent that was adopted as a living document by the Council of Ministers of African countries in Botswana in February 2023.

This strategy includes the formation of an AfCFTA Automotive Task Force to implement the strategy. Never before has Africa seen such alignment; the right players are in the room with growing support from African governments.

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