Climatic, ADB Ventures’ series about the innovators decarbonizing Asia and the Pacific, has returned with a new series about electric mobility. The newest Climatic talk show takes a close look at the booming electric vehicle market and it potential to help the region achieve net-zero carbon emissions. In this episode, a top regional EV manufacturer and a panel of VCs and industry experts discuss how EVs are reshaping the Asia Pacific transportation industry.

Transcript

Linh Thai  00:10

Welcome back to Climatic, a series about the innovators for reducing Asia's carbon footprint. Today on Climatic, Electric Vehicles. The EV market is hot. Electric car registrations rose 41% last year during a pandemic, in a year when car sales overall dropped 16%. And that's just passenger cars, electric motorbikes, three-wheelers and delivery vehicles are becoming a sight that is more and more common across Asia. Everyone knows cars and trucks have a huge carbon footprint. Is the booming EV market a path to net zero carbon emissions? Let's find out. I'm joined today by Sohail Hasnie. He's a Principal Energy Specialist at the Asian Development Bank. He's also a peer reviewer for the International Energy Agency and their annual electric vehicles outlook. Sohail, when it comes to electric vehicles, where are we today?

Sohail Hasnie  01:13

You know, when the first Nissan LEAF came, I think around December 2010. At the time, we are looking forwards when will electric vehicle hit the 1-million mark. I think by the time we hit the 1-million mark was around 2015. And then the next million took much shorter and then, much shorter. And today, more than 10 million Electric Vehicles are running globally. So, if this current policies continue, that means what the policies that are already here, globally, we expect to have at 145 million Electric Vehicle by that time.

Linh Thai  01:52

But what's the climate impact? I mean, electricity still has a carbon footprint.

Sohail Hasnie  01:56

If you want to do 100 kilometer on the Toyota Corolla, you need about eight litres of petrol. And that eight liter of petrol when you burn it, it will produce say about 18 kilogram of carbon dioxide, which is causing a global warming. If you did the same 100 kilometer on an electric vehicles a Nissan LEAF, which is also a very common Electric Vehicle, it will take you about a 20-kilowatt hour of electricity. And based on today's electricity generation source, that will be nine kilogram of CO2. So, 18 kilogram of CO2 versus nine kilogram for the same distance, it's phenomenal.

Linh Thai  02:38

Okay, I can see how that makes sense if a country is producing its electricity by solar or hydro power. But what if you take a country like Vietnam where I am, for example, we're still burning a lot of coal. Would you say what you're saying still holds true?

Sohail Hasnie  02:53

If you do a side-by-side comparison, I mean, you coming back to that third example, it's coming somewhere from the Middle East. It's getting pumped up. It's getting refined. It's getting shipped to you and I through large tankers, small tankers, trucks, and then, a large inventory. And by the time you get it, when you burn it, 70% of the energy goes into producing a heat because this is just a byproduct. You see, only maybe less than 25% ultimately creates the movement on the wheels, and that's what we are looking for. But if you go for electric, electric motors are 98% efficient. As soon as you have the electricity, turning it, so everything comes to the wheels.

Linh Thai  03:44

Thanks, Sohail. The industry has definitely seen strong growth over the past 10 years. And the impact that it's capable of having on climate and the environment is significant. As an investor myself, this feels like an industry where we can really double down where there's real alignment between opportunities to make big bets and to generate big climate impact. So, let's say if I were to have a crystal ball, what EV Technologies would I see on the horizon? And how can entrepreneurship help the EV transition happen even faster? Doug Parker is an automotive startup founder turned investor with Wavemaker partners. Doug, what are some of the electric mobility startups you've invested in?

Doug Parker  04:25

Personally, and with Wavemaker have invested in a number of interesting companies. One of them is Summit Nanotech that a more environmentally friendly way, a faster way and a more affordable way to extract lithium from the ground. We're going to need a lot more lithium as we scale up Electric Vehicles, and this company can help us get it out of Argentinian, Chilean and Bolivian deserts, where water is scarce. One company we've invested in is called Vflow. They build flow batteries. They can actually be used with existing service stations. You can convert an existing service station to charge Electric Vehicles, and alleviating some of the promise that Electric Vehicles might cause for the grid.

Linh Thai  05:06

You mentioned batteries. Let's dig into this a bit. One of the core technology areas when it comes to EV's is in the battery. But at the same time, this is also one of the areas that has a significant environmental impact, both for manufacturing as well as disposal.

Doug Parker  05:21

I think lithium extraction is a really interesting area for innovation. Today, you mined lithium largely in deserts and deserts in Argentina, deserts in Bolivia, and Chile. And what you do is you pump freshwater into mines, dissolve lithium salts, pumped them out into large evaporation ponds, where the water over time will evaporate and leave the lithium salts on the ground along with a lot of other contaminants, which you then have to process with bleaching and all types of acids to really get down to your nuclear lithium. We're really excited to have invested in Summit Nanotech, a company out of Canada that is working on a way to extract the lithium from the brine right away so that you don't need to wait for three years for it to evaporate in the evaporation ponds.

Linh Thai  06:09

What other kinds of EV tech are you looking at that are also creating these double bottom line results?

Doug Parker  06:15

So we think there's opportunities around electric service stations. Particularly, how you can get these service stations connected to the grid. Again, we're really excited about commercial fleets. We're interested in how you're going to charge those fleets. But also how are you going to route those fleets through the city? How are you going to maintain the batteries over time? And how are you going to resell those cars?

Linh Thai  06:36

So, one of the things that's really stood out for me is just how much innovation there is in the EV sector, which really sets a high bar for any company that wants to compete in this space. As an investor, where do you set the bar?

Doug Parker  06:50

One of the things that we're doing is we're trying to find companies that can have a gig, a 10th of a gigaton impact, reduce 100 million tonnes of carbon annually from our emissions, as well as have $100 million run rate. Now, that's a pretty tall order. Those are two really big targets. But it also helps us screen to really make sure we're focused on the biggest opportunities. So, we're definitely not just focused on dollars, we're definitely focused on large scale carbon reduction.

Linh Thai  07:22

That's really eye opening. Thank you, Doug. The Asian Development Bank's Venture Arm ADB Ventures recently made an investment in the EV space in a company called Euler Motors. Saurav Kumar, CEO of Euler is here with me now. Saurav, can you tell us more about your company and the products that you provide?

Saurav Kumar  07:40

So, we started in 2018. We are a automotive tech startup and we are focused on the light electric commercial vehicle segment.

Linh Thai  07:48

Can I ask why commercial vehicles?

Saurav Kumar  07:51

So fundamentally, why we started the company was to combat the climate change and air pollution. And if you look at the segments that commits award gives you most a lot of air pollution, it's the commercial vehicle. Every day, a commercial vehicle today is being used 80-100 kilometers in a day. So even if somebody is paying let's just say X amount of dollar in the upfront costs, because of let's say, lithium ion batteries or electronics, which we're not there in your traditional vehicles, that X amount of dollar gets very quickly paid up because you're utilizing the vehicle very, very heavily on day-to-day. So if you run 100 kilometers, let's just say, for 380 roughly ended up running like 30,000 kilometers in a year versus when you take a private vehicle, some days, you're running 20. Some days you're running 50. There are days with 250. But those are very, very less number of days. So that from a commercial sense, it makes sense like somebody buys it and immediately saves up on the saving on the fuel expense.

Linh Thai  08:57

Are you looking just at the Indian market?

Saurav Kumar  09:00

So when you think about the market, overall, India on a year-to-year does roughly 600,000 sort of vehicle, commercial vehicle in a year. It is 600,000 vehicles that India builds every year. That's roughly a $10-billion market by 2030 itself. So it's a very, very large market, even though it's a niche market. And this is something that has a global parallel so you can take these products and you can find market for it in the Southeast Asia, parts of Africa, parts of Europe, South America. So this is this is not a product that you will need for, from an India product itself. It's a product that we believe that once we solve it for India, we can scale it globally.

Linh Thai  09:48

I can definitely see the need and demand for your cars in many different markets. But before you conquer the world, you're focused first on India, and it seems like the Indian EV market is quite hot right now. Can you talk about some of the reasons why?

Saurav Kumar  10:02

Post 2017, I've seen that at least from the focus from the different government ministries have been pro EV and year after year, they have been coming with consistent sort of EV policies.  In general, very high level, I mean things if you think about why EV adoption  well,  I mean, there is one commitment part to India, committed to the Paris Climate Change required, then the United Nation goal. So that was on the commitment part. Then, if you come to the other side, which is we have like a lot of more than 10 cities in India have severe air pollution. So that's also like internal I mean, reason why our commitment further makes sense. Then the third part, which where your center, and state and different ministries are coming together with the ecosystem, which is your OEM, your charging stations network, your suppliers, all of them together. And but when you think about that transition, it actually took some time. But I think now, that entire ecosystem is thinking about deploying vehicle. So every month on month, we have been seeing different OEM announcing their plans on launching their vehicles in segments from a two-wheeler to four-wheeler to commercial vehicles. So that's one of the reason why we believe like, and timing is now, right? Like lithium cell, which was one of your major innovator in sort of the transition. So when you think about let's just say, you go 10 year back, you should think about $800 to $1,000 per kilowatt hour was your lithium cell prices. And today, that has come down to less than $200 per kilowatt hour. So that had that that's a massive cost reduction. And so, some of these total cost of ownership had started making sense.

Linh Thai  12:08

Yes, exponential chatter, indeed. Thank you, Saurav. Let's turn now to the chatter that's happening within more traditional industries. Sophia Nadur joins us next. Sophia, you run the Corporate Venture Capital Arm of BP. And I know you're also very interested in Electric Vehicles. Now, it seems like these are conflicting interests. Aren't EV's a threat to BP's core business?

Sophia Nadur  12:32

In 2020, BP announced a new purpose and a new vision, which is to reimagine energy for people on the planet. To make this purpose a reality. we've adopted the ambition to become net zero company, but also to help the world to get to net zero. And in so doing, lift people out of poverty, and ensure that they have access to reliable, affordable and cleaner energy. And so, we don't see Electric Vehicles or electrification as a threat. We actually embrace that as part of our business, a part of our business model.

Linh Thai  13:03

To reimagine energy, that's awesome. And to get there, I have to believe BP has its own R&D department. What are some of the reasons why a well-resourced market leader like BP would be exploring electric mobility innovation through startups?

Sophia Nadur  13:20

There are two reasons why startups are crucial to delivering on own net zero ambition and for us to help the world get to net zero. Because the energy transition is happening so quickly. Even though BP has such deep technology expertise and capabilities, we need startups to also bring in their own technology, and which we can then integrate quickly into scaling up offers faster to be able to meet the transition head on. Startups as well, they can offer us actually new solutions to old problems.

Linh Thai  13:54

This seems to be a recurring theme these days. Companies are recognizing the synergies that can happen when big money meets nimble founders. Is this why BP set up BP Ventures?

Sophia Nadur  14:05

So, BP ventures plays a key role in helping the company reinvent itself as an integrated energy company in line with a new purpose. We do this by investing in a portfolio of high growth technology businesses that will benefit and extend our core businesses, but also open up opportunities in digital adjacencies and in new technology areas that are still emerging. We also invest in businesses that help BP and help its business units reduce carbon in its operations and production.

Linh Thai  14:37

Okay, let's talk a bit about China. To date, BP ventures has not invested yet in many Asia-Pacific Electric Mobility Startups. But you did invest in one in China. Is this a sign of more things to come?

Sophia Nadur  14:50

BP Ventures made a minority investment in a Chinese company called Publisher which has an interesting digital tech stack which helps to deliver charging to private cars and fleets as well. They also have additional tech stack in battery technology, energy management space. But all Asia-Pacific countries are transitioning away  from fuel- based mobility to electrified mobility. And because these electric vehicles enable much more digital tech stack integration, it's important for smaller companies to think about it.   

Linh Thai  15:29

Thank you, Sophia. When I think about electric vehicles, and the tremendous progress that's been made over recent years, it gives me a lot of optimism. If you look at the challenge of getting to net zero carbon emissions, there are so many headwinds. But the innovations seem to happen just as quickly as the challenges are discovered and the private sector really seems to be in the driver's seat. Let's take a look at another side of the coin, governments. What do governments need to do to build a vibrant EV market in Asia? I'm speaking now with Kartik Gopal, an Electric Vehicle Specialist at the IFC, part of the World Bank Group. Kartik, what do you think? What are your thoughts on all this optimism?

Kartik Gopal  16:10

I do believe that in the short to medium term because of the higher capital cost of Electric Vehicles vis-a-vis the current ICE vehicles, you do need a little bit of a financial support or an incentive of some kind to bridge that gap. In addition, in markets where you have four-wheelers, clearly, there's a very strong need for suitable charging infrastructure as well. So, there is a need for some form of subsidized support for charging infrastructure offtake as well.

Linh Thai  16:39

There's definitely quite a list of issues to be considered. Where does the supply chain fall on this list?

Kartik Gopal  16:45

So, with the new Electric Vehicle technology, especially for batteries, and motors, there are new kinds of materials or minerals that are required for making these products. So if we have dependence on lithium, or nickel, cobalt, manganese on the battery side, then of course, there's also ferrous and aluminum, iron and aluminum, but they are more abundant yet available, so there is less of a challenge there. Similarly, on the motors, especially for high power motors, there are rare earths that are used for some of the magnets. So there is clearly these are all metals that are available in very localized markets. They are not widespread. They're not available in a very widespread manner across the globe, which means that just as in the oil markets case, a certain set of market countries could have a dominant position in controlling the supply of such minerals. Theoretically, there is a possibility that we could see a new kind of an oligopoly emerge with countries who have the availability of these minerals controlling the supply of that. So, how do we make sure that this does not lead to another set of challenges for accelerating the adoption of Electric Vehicles, ensuring that is sufficient. On the one hand, there has to be sufficient investment into developing these mineral supplies, but also making it available so that anyone who in any country that wants to develop a local automotive market has the right level of resources that are available to enable it happen.

Linh Thai  18:22

One of the challenges that the UN has put out there is this race to net zero and it seems like many countries are taking this initiative quite seriously. And everyone keeps saying how critical this next decade is going to be. However, policy tends to change slowly. Is 2030 really a realistic time horizon for policy changes to make a difference?

Kartik Gopal  18:43

But I am hopeful I'm very optimistic because I'm seeing that every country, every city that we operate in as IFC that has a very keen interest to do this. There is a very keen interest to make this happen. But what I'm drawing hope from is two things. One, the realization that Electric Vehicles are the future. I think that realization has clearly been accepted. And second, there is a very strong desire to find solutions. It's people are being pragmatic. They understand there are problems on the ground. But I think the intent and the motivation to find solutions is something that I am very strongly trying hope upon.

Linh Thai  19:25

Thank you Kartik. Electrification is happening fast in the automotive industry. And as someone who cares about climate, this discussion has really made me optimistic about how at least one industry is contributing to the world's net zero carbon ambition. And I'm seeing some really interesting opportunities for venture capital for development, finance and policy to participate in that transformation in Asia and the Pacific. I want to thank all the guests who joined me today. Sohail Hasnie from the Asian Development Bank, Doug Parker from Wavemaker Partners, Saurav Kumar from Euler Motors, Sophia Nadur from BP Ventures and Kartik Gopal from IFC. Until next time. Keep growing. Keep innovating. Keep resilient

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