By David Fickling
FOR THE EMERGING megacities of Asia, the oil crisis spreading from the Strait of Hormuz is like the acute phase of a chronic condition.
The largest migration in human history is filling their streets and alleyways to bursting point. Urbanization and births will add a billion more people between now and 2050. Jakarta and Dhaka, with 42 million and 37 million people respectively, have overtaken Tokyo at 33 million as the world’s biggest metropolises. Delhi, Shanghai, Guangzhou, Manila, Kolkata, Seoul, Karachi, and Bangkok aren’t far behind.
Keeping that many people on the move is a challenge at the best of times. When the price of road fuel doubles, it becomes a nightmare.
The good news is that one country in Asia has been through this cycle already: China. It offers a guide for how to cut oil import bills and transport costs for citizens, reduce pollution from noise and exhaust smoke, and make the urban experience a more pleasant one for the average resident. Asia’s megacities can follow the Chinamaxxing trend that’s taken over social media lately: On quality-of-life issues, there’s plenty to learn from the country that’s home to one in five of the world’s urbanites.
From the perspective of a rich country, it’s easy to think that the electrification of transport is all about passenger cars. In emerging Asia, however, the real gains are to be made in scooters, motorbikes, trucks, and buses.
Two-wheelers are most ripe for EV disruption. As we’ve written, parts of Asia are already moving toward hard restrictions on gasoline-powered bikes and scooters. Most Chinese cities have been operating with such restrictions for a decade or more, making them motorbike-free zones. Nearly 60% of sales are already fully electric.
Falling battery costs are now changing the game across the region. In India, a base model Ola Electric Mobility Ltd. S1 electric scooter costs about 90,000 rupees ($964), compared to 78,000 rupees ($836) for the entry-level gasoline-powered Honda Motor Co. Activa. That’s close enough to make the electric bike a serious proposition, especially when you consider savings on maintenance and fuel. With small batteries that can typically be swapped and charged at home, such bikes don’t require costly infrastructure, either.
They also offer a quick route to making the urban environment more pleasant. Conventional motorbikes and scooters contribute a disproportionate amount of particulate pollution. Just one can make as much noise as 30 electric bikes. When visiting EV-dominated major Chinese cities these days it’s striking how weirdly quiet they can be.
Unfortunately, the sector elsewhere has been held back by baffling policy reversals. Indonesia, the third-largest two-wheeler market, announced the cancellation of its EV subsidies last year, leaving manufacturers and buyers uncertain of what was going on. India, the biggest, recently cut sales taxes on conventional motorbikes from 28% to 18%. That’s still higher than the 5% levied on EV bikes, but the narrowing of the discount made electric models less competitive. Policies encouraging a wholesale switch should be expanded, and held in place.
Trucks will be a harder fix, but there are opportunities there, too. Asian megacities, including those in China, already restrict deliveries to nighttime to prevent vehicles cramming up the road — but that creates its own problems, because noisy diesel engines ruin everybody’s sleep. Smaller trucks are already cost-competitive once you factor in fuel expenses, but operators still lack the incentive to switch. Cities should complement their night-delivery rules with charges for non-electric deliveries, similar to those employed in Europe’s low-emission zones. The revenue can be used to provide low-cost loans for drivers to switch to new, cleaner vehicles.
Buses form the last part of the picture. In China, two-thirds of the fleet and 97% of city bus sales are now electric. Typically, these services are state-run, so governments are well placed to act. Though they are a small share of traffic and fuel consumption, using fleet renewals to stimulate local supply chains will help build capability in manufacturing other heavy-duty vehicles, such as trucks.
We can’t ignore the EV car fleet, but that’s going to be the toughest nut to crack for emerging megacities. It will require comprehensive charging networks and costlier subsidies, given the sheer scale of the potential market. It will also funnel money to affluent citizens least in need of it. Metro systems, being built across Asia at a furious pace, are likewise a relatively big-ticket way to tackle the fuel, pollution, and traffic problems faced by 21st century metropolises.
Governments should certainly remove any subsidies that still incentivize gasoline and diesel usage. But making the transition to EV cars and commuter rail is a challenge that will take billions of dollars, and years, to solve. For governments struggling with the fiscal headaches spawned by the Iran war, Chinamaxxing the two-wheeler, truck and bus fleets will be far quicker, and cheaper. Fix that problem, and you’ll also make the cities of the future more pleasant places to live.
BLOOMBERG OPINION
