CHARGE AND DRIVE

Environmental situation and the measures against climate change have been among the widely discussed topics on the global agenda, as important as geopolitical issues or global economic crises. All projects somehow related to these topics are actively discussed and funded...

Obviously, there is special emphasis on the development of electric vehicles, which should, according to environmentalists, reduce harmful emissions. Key motivation is the law that will effectively ban the sale of cars with internal combustion engines (ICE) in the European Union starting from 2035. To encourage demand for this still unpopular mode of transport, the developed economies are almost handing out money to citizens in the form of various subsidies.

Meanwhile, neighbouring Turkey and Russia are actively developing the production of electric cars.

Azerbaijan has also made progress on this issue: the government recently decided to exempt from customs duties the import of electric cars produced maximum three years ago.

Advancing global changes

The global community needs $1 trillion to successfully tackle the negative impacts of climate change. The UN Special Envoy for the Financing of the 2030 Agenda for Sustainable Development, Mohamed Muhyiddin, cited these figures at the 27th Conference of the Parties to the UN Framework Convention on Climate Change (COP 27).

World Energy Outlook 2022 report of the International Energy Agency forecasts that annual global investment in clean energy will rise to more than $2 trillion by 2030 as part of the climate policy (over 50%).

Environmentalists estimate that land means of transport account for around a fifth of carbon dioxide emissions. Given the above, the focus on considerable changes in the automobile market is understandable - the world is on the verge of mass introduction of electric cars and rejection of internal combustion engines.

There are opponents of electric cars, though, who argue that they are just as damaging to the environment as conventional cars. Their argument is that CHP plants will need to meet the ever-increasing demand for electricity, which will increase harmful emissions. In addition, battery recycling can also cause serious environmental damage.

But scientists believe that even with these facts, if half the cars around the globe were electric by 2050, it would reduce global CO₂ emissions by 1.5 gigatons annually.

On October 27, 2022, EU member states and the European Parliament reached preliminary agreements on a bill that would effectively ban the sale of internal combustion engine vehicles in the EU from 2035.

Temporary exemptions will be made for manufacturers producing less than 10,000 cars a year, i.e. manufacturers of luxury cars such as Ferrari. The agreement also leaves open the possibility of allowing future sales of cars with internal combustion engines powered by so-called e-fuels - a type of synthetic fuel that is produced using electricity from renewable sources.

Meanwhile, we can observe record sales of electric cars in Europe. In fact, the European market increasingly becomes the largest electric car market on the planet after China. Consumers are encouraged by government subsidies and the availability of dozens of new cars, including hybrids. More than one million such cars were reportedly sold in the EU in 2020. Norway became the first country where the sales of electric cars exceeded that of all other types of cars.

Moody's predicts that by the end of the 2020s, 35% of cars will be powered by alternative energy sources, while the International Energy Agency estimates show the number of battery-powered cars reach 40-70 million units by 2025.

Goldman Sachs predicts that the share of electric vehicle sales will grow to 8% by 2030 and 32% by 2040. The bank's analysts estimate the market for batteries for this type of transport increase to $180 billion by 2040.

National brands

Meanwhile, there is an ongoing epidemic of electric vehicles around the world. Almost all the major car manufacturers are opening up new lines to focus specifically on eco-friendly vehicles.

China is believed to be the largest electric vehicle producing country today. China's BYD has surpassed Tesla, selling 641,350 electric vehicles in 1H2022, a 314.9% increase over the same period in 2021. This comes as no surprise, as the Chinese government has invested at least $100 billion over the past decade to support the development of electric vehicles. The country has long had a system of various kinds of preferences, including differentiating access to the road. Moreover, it can cost up to $12,000 to buy a number plate for a car with an internal combustion engine, while it is free for electric cars.

A system of preferences for the purchase and use of electric vehicles is now in place in many countries around the world. However, high end-product prices are hindering the development of this market. Given the growing demand and in an effort to liberalise prices, a number of countries are actively creating their own national brands for electric vehicles. For example, Saudi Arabia's sovereign wealth fund said it has set up a joint venture with Foxconn. Together, they will create the brand Ceer, which will license BMW components to produce cars.

At the end of September, the Lipetsk plant of Russia's Motorinvest started the serial production of electric cars Evolute. The first model was called i-Pro sedan. The plant plans to produce 2,000 electric cars by the end of the year. In the future, the sedan will be accompanied by i-Joy crossovers and i-Van minivans.

Perhaps the most high-profile event of recent days was the presentation of the TOGG national electric car made in Turkey. The event took place on a symbolic date – the Republic Day attended by President Recep Tayyip Erdogan.

"Turkey is one of the leading exporters of motor vehicles. The TOGG project confirms that our common dream to create a strong future for Turkey has come true. It is the pride of an 85-million-strong country," Erdogan said, noting that the plant is designed to produce 170,000 electric cars annually. According to Mr. Erdogan, TOGG cars will appear in Turkey by the end of 1Q2023 after proper certification. The price of electric cars will be known in February.

Five models and six colours symbolising different regions of Turkey will be produced in the province of Bursa (Gemlik) in the west of the country.

The TOGG project was unveiled in 2019. Serial tests of the crossover prototype took place in November 2021 - it accelerated to 100 km/h in 4.8 seconds. According to the manufacturers, it will take 30 minutes to charge the electric car 80%, which will be enough to cover a distance of 500 km.

In a telephone conversation with Recep Tayyip Erdogan, Azerbaijani President Ilham Aliyev praised Turkey's launch of electric car production as another success for the fraternal country.

Challenges in local market

Unfortunately, the electric car market is underdeveloped in Azerbaijan. Baku is literally flooded with hybrid-powered cars, but there are still few pure electric cars.

According to the State Customs Committee, only 153 electric cars were imported into Azerbaijan in the first half of this year.

Although this is more than four times higher than last year, the share of electric cars in the country's car imports is only 0.5%.

At the same time, we also have certain preferences in this respect. For example, the imported electric cars are not subject to VAT. Just a few days ago, in accordance with amendments to the applicable regulatory documents, electric cars produced no more than three years ago will be exempt from import customs duty. The same amendment also exempts from custom duties the import of charging devices for electric cars. According to the decree of the Cabinet of Ministers of Azerbaijan, this decision will take effect after December 10, 2022.

The Central Bank of Azerbaijan has also recently amended the Regulation on Prudential Norms and Requirements Related to Credit Risks, including Large Credit Risks. From now on those willing to loan money to buy electric vehicles produced less than 3 years ago must make a down payment of only up to 10% of the loan amount.

However, according to experts, along with the introduction of incentives for the sale and purchase of electric cars in Azerbaijan, it is necessary to actively develop the required infrastructure. Admittedly, there are not enough charging points for electric cars in the country, which significantly affects the willingness of potential customers to switch to environmentally friendly vehicles. According to the latest official data, 33 charging points for electric cars are currently available in the country, of which 22 are located in Baku and 11 in regions (two in Ganja and the rest in Guba, Kurdamir and other districts).

According to Rauf Gurbanov, head of the Economy Department of the Ministry of Energy, today the government is actively working to solve the infrastructural problems in the market.  For example, there are plans to set up and connect charging stations for electric cars to the common grid. The capacity of these points will presumably not exceed 150 kW.

Gurbanov noted that there are proposals on concessions for these vehicles in parking spaces. "In addition, perhaps in the future these types of vehicles will be completely free to drive on toll roads. We are also planning to develop a mobile app that will show the charging points for eco-friendly vehicles," Gurbanov said.

At the same time, experts consider it necessary to import electric cars to the country at lower prices to meet the demand of the middle-income population.

As to the possibility of in-house production or assembly of low-cost electric cars, this is also a realistic prospect. Moreover, the Nakhchivan Automobile Plant has already announced its plans to do so this summer. To this end, the first samples for the assembly of CHANGAN AUCHAN 7- and 5-seat electric cars, which can travel 300-350 km with a fully charged battery, have already been delivered to the plant.

The global trend towards electric cars will touch Azerbaijan soon anyway. If Azerbaijan succeeds to make available the promised infrastructure and budget models by that time, the market for eco-friendly and cost-effective vehicles will have no shortage of customers. Given the growing number of ICE cars in Baku and the damage their emissions cause to the environment, electric cars could be a real lifesaver for the environment.