Electrification Efforts Growing in Latin American Countries

Latin American markets have been slow to adopt EVs. However, urban populations are growing more dense and congested, prompting governments to confront smog issues. Alongside commitments for greenhouse gas (GHG) emissions reductions, many Latin American governments are looking to transportation electrification. A few of the most significant developments are as follows:

• Chile: In December 2018, Chile acquired one of the largest electric bus (e-bus) fleets with the delivery of 100 BYD e-buses to its capital Santiago, and has placed an order for another 100 from Yutong. Chile’s energy minister has said the government’s goal is for EVs to make up 40% of Chile’s private fleet and for its public transportation fleets to be fully electric by 2050. Additionally, Chile has several policies to promote vehicle electrification in the country. These include exemptions for EVs from tax and traffic restrictions, subsidies for taxi fleets to switch to more fuel-efficient vehicles, and even electric truck pilots.

• Mexico: In 2014, as part of its pledge to procure only zero-emission buses by 2025.es also has a growing electric bike and electric scooter market and has plans to purchase 300-500 e-busMexico City Mexico began taxing carbon emissions on fossil fuel production (approximately $3.00 per ton COe) and established a voluntary carbon exchange. Additionally, EVs are exempt from the federal sales tax. Mexico City offers additional plug-in EV (PEV) incentives, making PEVs exempt from circulation fees for 5 years and reduced by 50% the next 5.

• Peru: The government has eliminated import taxes on EVs and has announced intentions to launch a financial incentive program for buyers of EVs. However, the Peruvian PEV market is practically nonexistent. The only vehicle currently available in this market is the hybrid Toyota Prius.

• Colombia: The Colombian government has several incentives for reducing emissions through vehicle electrification. It has granted EVs and public transportation vehicles exemptions to value added tax since 2012, and in 2017 the government established a 0% import tariff on EVs and a 5% tariff on hybrids. Some cities in Columbia have committed to shifting away from diesel engines, as seen in Medellín, which recently purchased 64 e-buses from BYD. However, the transit fleet of Bogota has opted to go with diesel and natural gas buses rather than e-buses for its next fleet renewal despite these incentives.

• Costa Rica: In 2017, the Costa Rican central government instituted a tax exemption for EVs. Costa Rica has committed to building out a network of 40 recharging stations across the country, beginning construction this year. Additionally, the country is conducting a pilot with three e-buses that is set to launch this year.

Latin American Countries Need Strong Policies to Overcome Obstacles

Ambitions aside, there are significant challenges for transportation electrification in Latin America that are beyond the above developments. For one, most consumers are priced out due to inadequate financial incentives and a lack of domestic PEV manufacturing capacity, which limits availability and increases purchase costs. Steering the domestic industry toward electrification is possible as evidenced by fuel efficiency and GHG standards in China, Europe, and North America.

Without such policies, Latin American PEV markets will be focused on fleet acquisitions, many of them symbolic. Without action, domestic manufacturing capacity will fall behind international competition. Once the global PEV market hits the inflexion point, Latin America’s domestic automakers could be in a difficult position.