Faster electric car rollout in Bangladesh demands policy support

Bangladesh envisages unconditionally reducing 3.39 million tonnes of carbon dioxide (CO2) emissions from road transports by 2030, as stipulated in its Nationally Determined Contributions (NDCs). In light of the climate change mitigation goal, the government has been supporting the development of framework conditions for the rapid adoption of electric vehicles (EVs). The aim is to reach 30% EV penetration by 2030. The government has also formulated guidelines for EV charging and EV registration. Moreover, the Automobile Industry Development Policy 2021 has provisions for incentivising local EV manufacturers.

While the number of electric three-wheelers has increased drastically in recent years, electric cars are yet to gain a significant foothold in the country. Consumers’ purchasing capacity and motivation remain difficult hurdles to the uptake of electric cars. Stakeholders believe that the rollout of electric cars would require further policy support.

The economic burden of air pollution in Bangladesh, for which transport is one of the major reasons, calls for strong policy-level intervention to increase the adoption of electric cars.

Support for electric cars in Bangladesh

The electric car market is very small in the country. Several reasons, such as high cost, lack of incentives and insufficient charging facilities, can explain the current dilly-dally approach of people in adopting electric cars.

Customs duty and supplementary duty of 72% and 20%, respectively, make the import of electric cars quite expensive in the absence of available local substitutes. While the neighbouring country, India, recently raised the customs duty from 60% to 70% for imported completely built units (CBUs) of EVs costing over US$40,000, it will not have much impact as local companies are already manufacturing electric cars.

Different Indian states offer cash incentives for a certain number of electric car owners under specific conditions. Moreover, India allows personal income tax benefits on the interest component if the owner avails of a loan to purchase an electric car. This scheme is applicable for a specified period. 

While a cash incentive to electric car owners may not be a viable option amid the challenges Bangladesh is grappling with, it may reduce the import duties for a fixed period, say one year, to encourage people to buy electric cars. Like India, the government of Bangladesh may consider providing tax benefits to electric car owners. 

Moreover, the proposed environmental surcharge on the second vehicle, based on engine capacity in cubic centimetres (cc) and equivalent kilowatt (kW), will dissuade an individual willing to buy the second car, whether electric or not. The government should waive this surcharge for electric cars, allowing individuals to switch to an electric car from the first car with an internal combustion engine within a reasonable timeframe.

Opportunities for utilities

In addition to creating demand for electric cars through policy support, charging facilities should be readily available for car owners away from home to allow them to enjoy long-distance travel.

Electric car owners will prefer convenient locations with quick charging facilities. Likewise, conscious car owners will value quality charging systems. The capital expenditure required for sufficient charging facilities may not make the business viable for the private sector. However, given that the primary goal of utilities is to sell electricity, the charging stations will further help enlarge their consumer base and increase revenue.

Additionally, the growing popularity of electric cars and the demand for charging stations in the future will help reduce the significant unused capacity of Bangladesh’s current power system. As the government of Bangladesh wishes to withdraw subsidies from the power sector, capacity utilisation of the power sector would remain key to minimise the increasing trajectory of losses that the sector has been incurring.

Utilities may further explore the opportunities to make the future charging ecosystem for electric cars greener, supported by solar energy. 

Finally, looming on the horizon, the government should devise well-coordinated policy measures alongside the imperative of achieving the NDC goal of mitigating CO2 emissions. The government should closely monitor the impacts of the policy interventions on the growth of electric cars.

The utilities should also be ready to facilitate convenient, high-quality and quick charging facilities. The economics will favour utilities to invest in charging infrastructures if policy measures drive the country’s rapid growth of electric cars. Of course, the prevailing unused power sector capacity is another motivation for utilities to enter the business. 

This article was first published by PV Magazine.