14 set EV Progress in Latin America
By Henry Martell & Chris Hernandez
Sales of electric vehicles (EVs) in Latin America have been rising at an unprecedented rate. The need to attain sustainable transportation addressing future energy requirements has played a significant role in driving EV demand in the region. Countries such as Brazil and Argentina are driving the momentum: Brazil alone experienced a 77% increase in EV sales from 2020 to 2021, and Argentina has experienced an overall 148% increase in low emission vehicles between hybrid and EV’s.
In response to this demand, the region registered nearly 25,000 EVs sold in 2021, more than doubling the 2020 level. The market is predicted to continue to grow past these values within the next few years. According to an article published in Bloomberg this past April, Brazil and Mexico, will see EV sales rise to 2%-4% by 2025. A recent study performed by Mordor Intelligence also anticipates that the South America EV market previously valued at USD $2.56 billion in 2021 will reach USD $13.43 billion by 2027, resulting in a compound annual growth rate of 19.45% during the forecast period.
EVs are also being utilized in mass public transit. In fact, some of the most illuminating EV experiments currently underway include trains, trolley systems, and buses. Latin American cities are emerging as significant players in this growing market. By one estimate, more than 2,000 e-buses were operating in at least 10 countries across Latin America by the end of 2021. That number is expected to rise. The International Finance Corporation predicts that by 2025 the region will add more than 5,000 electric buses a year.
The demand for electric buses is driven by the goal to reduce diesel emissions. Widespread adoption is likely to have a significant impact, given that per capita public transit is reported as higher in Latin America than in any other region of the world. A recent report from the International Finance Corporation (IFC), cited two notable examples of cities investing heavily in electric buses. Santiago, Chile has a fleet of more than 700 e-buses in operation. As a comparison, there were about 650 e-buses in the entire United States at the end of 2020. Santiago is forecasted to achieve a zero-emission fleet by 2035. Colombia, Bogotá has committed to place more than 1,000 e-buses into service in an effort to cut carbon emissions by 20 percent.
The LATAM region faces many growth barriers in both the private and public sectors. The greatest barrier is the high upfront costs of EV’s. The average transaction price for an EV is $10,000 higher than that of a combustion powered vehicle. Financial incentives are generally the most direct option to promote the uptake of EV’s). Governments in the region are putting efforts to provide economic support that lowers the current high retail price. However, economic disparity throughout the region and current levels of government financial subsidies are simply insufficient and ineffective.
The mass transit market appears to have developed solutions to financial barriers. As an IFC report points out, the majority of municipal transit systems are owned either by a public agency or by private operators with municipal concessions. The manufactures of these buses retain ownership and lease them to operating entities – referred to as an “unbundle” of ownership and operations arrangement. Bogotá, for instance, entered into a contract with Celsia Move to source the delivery of its bus fleet. In turn, Celsia Move entered into a 15-year agreement with Grupo Express to lease, operate and maintain that fleet. The unbundling makes each entity more attractive to different investors and appears to be a viable funding source for the development of emissions friendly EV-mass transit system.
Another barrier to EV growth is the insufficient charging infrastructure throughout the region. Some electric power sources lack the ability to provide the power necessary to support growth in demand. Power supply can also be inconsistent and unreliable in many areas of the region, which not only increases charging time, but can make the time it takes to charge unpredictable. Although these are challenging barriers, the region is developing its public charging infrastructure to ensure that EV users can travel longer distances with full battery charge. The deployment of this infrastructure has already started throughout the region more notably in Mexico and Brazil leading with investments in Level 2 (semi rapid) and Leve 3 (fast) type chargers. Depending on the KW of the charging stations, Level 2 chargers are able to provide 80% charge within 1 to 2 hours and Leve 3 chargers can provide 80% charge from anywhere between 10 to 35 minutes.
Regardless of the current economic and infrastructure challenges that remain within the region, Latin America is taking extraordinary measures to develop and fund the transition from pollutive emission to environmentally friendly transit solutions through widespread use of EVs. Latin America is setting the example for integrating greener transportation in its infrastructure, and the rest of the world should follow suit.