A break-even analysis for battery electric trucks in Latin America
Introduction
The transport sector is a main driver of Latin-American economies, but it is also accountable for the generation of negative externalities like climate change. In Latin America, the transport sector is responsible for 19% of CO2 emissions in the region (United Nations Environment Programme, 2016). Additionally, the International Council on Clean Transportation (2017) has projected a 75% increase in CO2 emissions in the region between 2010 and 2030 (with the exception of Brazil). Albeit these worrying figures, Latin America remains with one of the lowest CO2 emitting electric generation matrices due to the high presence of hydroelectric power and a growing development of non-conventional renewable energies (United Nations Environment Programme, 2016). Consequently, different transportation modes in the region, such as battery electric trucks (BETs), merit profound study.
The reduction of the transport sector's emissions is critical in order to attack the climate repercussions. Nevertheless, regulations on the transport sector are uneven throughout the continent, with some countries as Chile adopting Euro VI measures (since 2014) while others such as Uruguay have no regulations at all in this aspect. Despite these disparities, Latin America presents the best conditions for battery electric vehicles (BEVs) due to the high renewable electric energy generation potential (United Nations Environment Programme, 2016). Therefore, the transition towards electric mobility may ultimately result in a major boost for countries of the region in completing the goals set in December's 2015 Paris Agreement.
A global insight exhibits that Latin America faces several of the typical entry barriers for the expansion and usage of BEVs, with scarce incentives as the ones used worldwide to propel electric vehicles sales (Marchán and Viscidi, 2015). As with regulations, uneven usage of incentives in Latin America is also common: tax and import tariffs exemptions exist in some countries and are inexistent in others. For example, Brazil and Colombia have VAT exemptions for BEVs; Argentina, Chile and Uruguay do not. This exposes the inconsistent approach for efficient and sustainable transportation in the continent. Furthermore, not only timorous approaches are being made towards more efficient mobility (this includes and focuses on electric mobility), but also important fuel subsidies currently exist in the region which ultimately affect the adoption of alternative energy vehicles such as BEVs. Latin America has seen a small increase in BEVs purchases with just a few thousand vehicles currently circulating within the whole region. Most of which are corporate or governmental vehicles, taxis and buses, with just hundreds belonging to private individuals (Marchán and Viscidi, 2015).
Finally, in Latin America, the literature review made exposes that there are not many total cost of ownership (TCO) studies on BETs. There are recent reports that present the general situation in the region and some particular conditions given in some countries. The UN report (2016) presents a wide view of Latin America's relationship with electric mobility, the current market, the context for their introduction and the existing incentives for electric vehicles together with different future scenarios that might arise with electric mobility's growth. Marchán and Viscidi (2015) study focuses in the perspective for electric mobility in four countries (Brazil, Chile, Colombia and Mexico) and offers recommendations on key public policies to promote this new technology. However, no TCO study is done and there is no mention of BETs. Another grand view of the region's situation and future perspective on electric mobility is done by the Inter-American Development Bank (2016) with the singularity that this report includes a TCO analysis in the Latin-American context for a specific list of countries (Argentina, Brazil, Chile, Colombia, Mexico and Peru). Nonetheless this TCO analysis is based on the comparison of only passenger cars. Some recent studies on electric mobility in the region were also found, such as da Silva et al. (2018), but no reference to BETs were found. Their aim is to “present an overview of the economic aspects of BEV purchases from the consumers' perspective in all Brazilian state capitals” focusing in passenger cars. Despite the growing interest in BETs and emergence of new prototypes and announcements of production in Brazil as early as 2020, there are practically no studies made in Latin America, a niche that this paper aims to tackle.
Drivers and barriers intrinsically exist to any insurgent technology, with the latter overwhelming the former. This paper intends to compile all the existing barriers and drivers currently identified and consequently calculate the TCO for light-duty (LDT), medium-duty (MDT) and heavy-duty trucks (HDT) in diverse application scenarios (urban, regional and long-haul cycles) and different Latin-American countries. In section 2 a literature review on electric mobility worldwide, with focus on battery electric trucks, is shared. The main barriers that the technology faces and the trends in battery costs and development are highlighted. Once the literature review is presented, this paper will continue to analyse the potential break-even points for BETs in diverse scenarios across Latin American countries, particularly in Argentina, Brazil, Chile, Colombia and Uruguay. The first four are naturally alluring cases as they compose the main economic force of the continent and have successfully introduced policies related to electric mobility (except Argentina). Uruguay, due to its political and geographical situation, showcases an extremely interesting case study where renewable energy accounted for 96.2% of total generation in 2018.1 Section 3 explains the methodology applied to calculate the TCO for the different countries and scenarios. Results are presented in Section 4, followed by a sensitivity analysis portrayed in Section 5. These results are finally discussed in Section 6, complemented by possible political practices and measures that would increase adoption of this technology. A qualitative insight is also given as to how the TCO may vary with fluctuations that may occur to some parameters.
Section snippets
Literature review
Research on BEVs has increased over the years and a significant amount of studies have been made in the field. Nonetheless, research in BETs is still young, even more so in Latin America. This research compiles studies of both streams and gathers data to provide a basis upon which to study new horizons of BETs in Latin America. Using Scopus database, over 200 papers were found through the use of several keywords such as “battery electric vehicles”, “electric mobility”, “battery electric trucks”
Methods and data
The purchase of a vehicle does not only involve an initial buying price. As Lebeau et al. (2015) state, at the moment of deciding the purchase of a vehicle, “a rational fleet manager should consider every cost related to the vehicle choice, and not only the purchase cost”. This means that the TCO ought to be analysed and not just the initial purchase price. When selecting this approach to compare between a conventional and electric truck, other variables besides the buying price such as
Results
In first place, applying the TCO model developed in MATLAB (explained in Section 3), the break-even year was found for each of the 45 segments, these can be seen in Fig. 4 and Fig. 5. It should be remarked that for the model developed, no stochastic behaviour is considered, and all values are predetermined for coming years. In Fig. 4, the break-even years are shown for two different scenarios: one that considers energy price as constant over time and the other one that considers a 2% inflation
Sensitivity analysis
The results obtained are limited to specific values and constrained to various assumptions expressed in the methodology section. Assumptions that might be subject to some variations in local market conditions (affecting purchase price) and uncertainty of prices’ escalation.
In order to evaluate the effect of the different variables in the TCO, the Uruguayan case study is selected to apply a sensitivity analysis by means of a Monte Carlo simulation. Uruguay is chosen since it has the closest
Discussion
Although uncertainty exists in future values of BETs and electricity and fuel costs, this study helps to achieve a wide perspective on the insertion of this technology in South America. Firstly, the paper finds that Chile and Uruguay -followed by Colombia-are the main countries that could experience an early break-even of BETs' TCO. The main reason behind this are the 35% import duties that Argentina and Brazil charge on foreign trucks (BETs are assumed to come from China and EU) to protect
Conclusions
This study conducts a literature review through which the state-of-the-art BEV's aspects are presented. A current gap on literature is fulfilled by this paper since TCO studies comparing BETs and ICETs in Latin America are scarce or do not exist at all. More importantly, this study analyses which segments will be the first to break-even in the different countries studied, using a TCO framework. It also finds and portrays the break-even year for each segment considering different variations in
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