Are we ready for electric mobility?

How can electric cars gain more traction in the Philippines?

Are electric cars feasible in the country? After all, a few brave manufacturers are offering them locally. With that, I’m confident enough to go ahead and give a soft, “yes.”

Yes, you can go ahead and buy a new energy vehicle (NEV) now. Whether it’s a pure electric vehicle (EV), a hybrid, or even a plug-in hybrid, you can use it as your daily home-office-home drive and not encounter an issue with charging or range. But does this mean the country is ready for an electric revolution?

Let's say you are considering an EV or, at the very least, a hybrid for your next ride. Well, you don’t have to feel like you’re all alone in this decision. That's because the DOE (Department of Energy) will back you up.

According to Assistant Secretary Leonido Pulido III, EV adoption will help address several challenges in the transport sector including,

• Reduce our reliance on imported petroleum products, which currently accounts for 70% of our oil consumption.

• Lessen greenhouse gas emissions (gasoline-fed tricycle that uses 1 liter of gasoline to run for 15 kilometers will generate approximately 2.3 kg of carbon dioxide. An EV running the same distance will produce only 1.05 kg of carbon dioxide-based on an emission grid factor of 0.7 kg carbon dioxide/kW).

• Decrease noise pollution.

• Help phase out old vehicles with a high amount of tailpipe emissions.

The agency has set a modest target of at least “10% EV adoption by 2040 and open access installation of EV charging stations in private and public establishments with due consideration on safety and performance.”

So why aren’t more people buying it? The number one reason is the price.

NEVs aren’t expensive just because they’re new models. It’s mainly because of the battery – materials, components, and design – which makes up almost a third of its price. That is why battery development and evolution is the primary driver in bringing of NEV prices down.

Battery makers are currently studying the possibility of replacing cobalt, which is very expensive, with nickel, an element that’s cheaper but can hold more energy. The trade-off is cobalt doesn’t overheat (or burn) as fast, which is a safety issue that can’t be overlooked.

Taxes

Vehicle import duties (tax on goods transported across international borders) are one of the biggest factors that affect the pricing of imported CBU (completely built-up units) NEVs. In the Philippines, it starts at 0% and goes up to as much as 30% per tariff depending on what type of vehicle it is and where it is imported from.

Let’s take this document from Customs as an example. It says here that the hybrid crossover BYD S5 gets a 30% MFN (Most Favored Nation) tariff ad valorem (based on its assessed value) and a 30% ACFTA (ASEAN-China Free Trade agreement) tariff ad valorem. Meanwhile, the Changan CS15 crossover with a naturally-aspirated engine still gets 30% MFN tariff ad valorem but only a 5% ACFTA tariff ad valorem. This is based on the 2017 Code and Rates of Import Duty.

Both the MFN and ACFTA are import duties. MFN is a trade policy that ensures equal trading among all members of the WTO (World Trade Organization), and the ACFTA is a trade bloc agreement between ASEAN and China regarding tariffs.

The DTI (Department of Trade and Industry) has long been mulling the possibility of reducing import duties of all NEVs to zero. But here comes the kicker, they might require the importing automaker to commit to putting up a local manufacturing facility. That’s a whole other problem altogether.

Then there’s House Bill 4075 or ‘Providing the National Energy Policy and Regulatory Framework for the use of Electric Vehicles and the Establishment of Electric Charging Stations Act’ that’s getting support from the DOE, DTI, and the DOTr (Department of Transportation). If Congress passes it and the President signs it, EVs and charging stations will be exempt from excise taxes, duties, VAT (value-added tax) for nine years, and that’s just for starters.

But it isn’t like there are no fiscal and non-fiscal incentives already available for registered and qualified enterprises. The DTI and the Board of Investments (BOl) offer the following under the Omnibus Investments Code (Executive Order 226) on alternative fuel vehicles:

Fiscal incentives:

• Income tax holiday;

• Exemption from taxes and duties on imported spare parts;

• Exemption from wharfage dues and export tax, duty, impost, and fees; Modified duty rate for capital equipment;

• Tax credits: and

• Additional deductions from taxable income.

Non-fiscal incentives:

• Employment of foreign nationals;

• Simplification of customs procedures;

• Importation of consigned equipment; and

• The privilege to operate a bonded manufacturing/trading warehouse subject to customs rules and regulations.

If you’re wondering where the TRAIN (Tax Reform for Acceleration and Inclusion) Act comes in, it’s with the excise tax (tax on the sale of a product locally). It already mandates zero for EVs, but only 50% for hybrids.

Right now, the incentives (for automakers to bring it in and for Filipinos to buy it) are nowhere near good enough. The goal is to make NEVs cheaper so that buyers will choose them over regular vehicles. But if the BYD e3 (EV compact sedan) still gets priced by more than half a million pesos over the range-topping Suzuki Ciaz (Php 978,000), which is also a compact sedan, then the whole point is moot and academic.

For reference, BYD PH sells the e3 here for Php 1.498 million. In China, the same model starts at just 103,800 yuan or Php 771,150. Even if you include China’s 10% purchase tax, it’s still not going to come close.

Incentives and subsidies

What can the government do?

Mark Tieng, managing director of BYD Philippines, which currently sells six EVs and one plug-in hybrid, says that duties should be reduced to zero and that subsidies should be given for ownership and usage.

An example of ownership subsidy is what various states in the US are doing. Each EV and hybrid buyer gets a federal tax credit that is based on the capacity of the battery used in the vehicle, and that can go as high as $7,500. Tax credits are dollar-for-dollar discounts on the amount of income tax you pay the government for that year.

In Japan, owners get anywhere from ¥400,000 to ¥800,000 in grants when buying an NEV, and one-time taxes (car acquisition tax, car weight tax, vehicle tax, etc.) are waived.

European countries like Belgium, France, UK, Germany, Norway, and others give massive purchase grants that go up to €10,000 (Php 584,883), plus zero ownership tax.

And then there are usage subsidies and perks. These include, but are not limited to, high-occupancy vehicle (HOV) lane exemptions, financial incentives for purchasing electric vehicle supply or equipment, vehicle inspection exemptions, parking incentives, road user tax exemption, and maybe even utility rate reductions for charging EVs during off-peak hours.

Of course, the government would be remiss not to create an infrastructure to support and boost NEV use. It would be a whole lot easier to convince the market to shift to NEVs if there are charging stations at workplaces, and various public destinations. Abroad, there are charging stations in malls, restaurants, resorts, fuel stations, and even parking areas.

Charging

After price, the second biggest concern of prospective buyers, especially of EVs, is charging. How do I charge it? Do I need special equipment?

Wipe your worries away because not only is it easy, automakers have made it simple and even provided buyers with options.

EVs like the models BYD sells or even the Nissan Leaf comes with a standard cable that plugs into the regular two-prong outlet you have at home right now.

BYD even goes a step further by supplying each EV model with several chargers. These include a 1.3kW (slow charger that plugs into a Philippine wall outlet), a 3.3kW (aircon outlet), a 7kW (equivalent to a 3-ton aircon unit), and a 40kW charger that will require a three-phase power supply.

The Nissan Leaf, which is confirmed to launch this year, can be charged fully in about 12-15 hours using a universal cable plugged into a dedicated home socket. If a special wall box (requires installation) is used, charging time goes down to about 5-7 hours.

Each 2021 Porsche Taycan comes with a Porsche Mobile Charger Connect. It's an AC charger with a five-inch touchscreen display that can be operated via WiFi. It can plug into a special three-prong grounded socket (needs installation) at your home or an industrial electrical socket.

So, regardless of the brand, and even the price, charging an EV won’t be a problem so long as you have electricity at home. And don’t worry about leaving the EVs plugged in overnight. Some systems automatically shift to trickle charging as soon as it is fully charged to protect the battery while others come with a charging timer.

For their part, the DOE will be the primary agency mandated by House Bill 4075 to enforce compliance with open access installation of charging stations. That's to ensure charging stations follow the Philippine Electrical Code, Philippine Distribution Code, and other relevant standards. It also updates the charging stations component of the Comprehensive Roadmap on Electric Vehicles in coordination with the DOTr, DTI, Department of Environment and Natural Resources (DENR), Department of Public Works and Highways (DPWH), LGUs (local government units), and other relevant national government agencies (NGAs).

Hybrid vehicles don’t need to charge. Its internal combustion engine and regenerative braking system charge the built-in battery during the drive. Plug-in hybrids, on the other hand, have the best of both worlds. It has the same system as a hybrid but also comes with a cable that can be plugged into a wall socket for charging, hence the name.

FCEVs are electric vehicles too but these use hydrogen for fuel. However, it’s no good for us because we don’t have hydrogen fuel stations (yet). Until they develop a model that can also be plugged in, these models will remain a pipe dream.

Range may be an issue for EVs, yes, but only if you do long drives every day – and I mean more than 400 kilometers one way. Current EVs have a 400-kilometer range on average, so a trip to Baguio shouldn’t be a problem. But if you’re doing Pagudpud for fun (that’s just a little under 600 kilometers from Pasig), make sure you have somewhere you can plug in along the way.

If you’re driving a hybrid or a plug-in hybrid, then range won’t be an issue. Even if the battery is depleted, the vehicle will just switch to the internal combustion engine. If you run low on fuel, just swing by any gasoline station to top up.

Cost of ownership and maintenance concerns.

Mark, who uses one of BYD’s EVs for his daily drive estimates consumption cost at about Php 1.8 to Php 2 per kilometer. A mid-size SUV that gets 8 kilometers per liter (diesel right now hovers around Php 35 per liter) comes out much more at Php 4.375 per kilometer. The good news is that his fuel bills went down by Php 10,000, but an increase of some Php 2,500 on his electricity bill was expected.

A Leaf’s range is 311 kilometers on one full charge. If your average daily drive is around 13 kilometers per day, you can go a full three weeks before needing to charge the Leaf again.

The Taycan’s range is 431 kilometers, but this EV sports car wasn’t just designed for long-distance driving. This baby goes from 0-100 km/h in just 5.4 seconds to a top speed of 230 km/h.

You’ll be overwhelmingly amazed to find out that despite being so much more advanced than your ordinary vehicle, the maintenance cost of an EV is way lower. It doesn’t use oil, so there’s no need for oil filters. The PMS is done once a year and it’s mostly just a visual inspection for leaks and corrosion. Hybrids and plug-in hybrids will still need to come in for regular oil changes as these have internal combustion engines.

Based on more than 400,000 Leafs in at least 60 different countries around the world, Leaf owners have experienced at least a “25% reduction (in cost of ownership, servicing, etc.) versus an equal-sized conventional car,” said Vincent Wijnen, Senior Vice President Nissan Asia and Oceania.

As low maintenance as it seems, EVs do need some looking after, especially the battery coolant and brakes. The former ensures that your battery doesn’t overheat (flushing intervals can be found in the vehicle’s Owner’s Manual) while the latter will be dependent on your driving habits and the regenerative settings used.

BYD says their batteries last for 4,000 cycles. Mark explains that if you charge once per day, it will last for ten years. After that, the maximum range and capacity of the battery go below 80%. Nissan’s battery guarantee is eight years.

Once the battery gets busted, that’s when you’ll have to bring out the big bucks. That's because it will cost about 50% of what you paid for the EV. But as we mentioned above, there are new tech and processes that engineers are working on to bring down the price of battery manufacturing which should bring down the SRPs of EVs.

One of the best things about driving an EV is you can forget about car trouble from broken alternators, radiators, transmission, and even fuel/oil/water pumps ‘cause it doesn’t have any of these.

Are we ready?

I know this was quite a read, so congrats that you made it here with your gray matter intact and a firmer grasp of the status of NEVs in the country. There are so many variables that need sorting out before NEVs become a viable option for auto buyers, but with the support of the private (Electric Vehicle Association of the Philippines, auto brands) and public sector (DOE, DOTr, DTI, etc.), we’ll get there.

Based on the information above, what’s your take on the question? You can keep the answer to yourself or post it in the comments section below.

We at AutoIndustriya are definitely for it, for all the reasons stated above and our guilty pleasures (thinking of flooring the Taycan on a closed track), of course.

But we’re not out here to convince you. We’re but a vessel of information so don’t ‘shoot’ the messenger. If you want to get a handle on NEVs, test drive one now and see how much you can save and how good it can be for the environment if you’re driving around in one of these cool and quiet electric vehicles. Besides, research done in 2018 indicated that 46% of Filipinos are thinking of getting an EV on their next purchase. That's a pretty promising number if you ask us.