The Long Road to Electrification  

Taiwan is developing electric buses with the aim of replacing all 10,000 diesel buses now in service within a decade. PHOTO: CNA

Despite an ambitious government initiative designed to help improve air quality, Taiwan has been slow to embrace electrically powered motor vehicles. Besides electric scooters, the major progress to date has been in development of electrically powered buses, which are already in service in several cities. Nearly all of the electric cars on Taiwan’s roads – an estimated 500 vehicles – are Teslas. For the market to grow significantly, the major challenge will be providing an adequate infrastructure in terms of charging stations. 

Emissions from motor vehicles are the primary source of air contaminants in Taiwan’s urban areas, according to the Environmental Protection Administration (EPA), which describes these pollutants as having a “severe impact on air quality and public health.” While smog carried across the Taiwan Strait from China also contributes to Taipei’s hazy skies, that factor is considered secondary.

Tim Ju, president of the Ford Lio Motor Co., notes that more than half of the cars on Taiwan’s roads are at least a decade old and one-third are 15 years old or more. “These old cars aren’t nearly as safe as new models, and they produce a lot of emissions compared to today’s cars,” he says.

To help clean up the air, the government has been promoting the adoption of battery-powered electric vehicles, which produce no tailpipe emissions. In late 2014 the Cabinet launched the Smart EV Development Strategy and Action Plan, focusing on electric cars, scooters, and buses.

The program has had some notable success, particularly with regard to electric buses. Taichung has a fleet of 70 in service, the most of any metropolitan area in Taiwan, and plans to have 150 e-buses running by the end of 2018. Kaohsiung introduced Taiwan’s first articulated, low-deck electric buses in October. Within a decade, Taiwan aims to replace all 10,000 of its diesel buses.

What’s more, the government will phase out the most polluting gasoline scooters within several years. To speed the process along, the government is offering generous subsidies covering up to 40% of an e-scooter’s cost. Those efforts are bearing fruit, as Taiwan e-scooter brand Gogoro is having a record year, selling 13,000 units between January and June, compared to just 12,000 in all of 2016.

By comparison, there has been scant progress in boosting the adoption of electric cars.

“Taiwan’s government has not created policies that support domestic EV businesses with regard to fostering effective business models and sustaining their long-term operations,” says Duff Lu, a research manager with the market-intelligence firm TrendForce. Campaigns to promote electric cars, which have been based almost exclusively on subsidies, have “been limited and without too many lasting effects,” he says.

The situation contrasts sharply with that in China, Lu observes. Subsidies in China of up to US$7,000 per vehicle have helped grow the consumer market, but they’re just a small piece of the puzzle. More paramount has been a clear vision for how EVs can shape China’s role in the world. In May 2014, Chinese President Xi Jinping called for China to become a global leader in new-energy vehicle production. Today, China is the world’s No. 1 maker and buyer of electric vehicles. Chinese customers are expected to purchase up to 300,000 EVs this year. “China’s EV market has grown so large that its demand and requirements can shape the developments of electric vehicles within major global car brands,” Lu says.

Bearing out that observation, Daimler announced in October that it would invest US$755 million in China for electric car and battery production. Volkswagen plans to invest US$12 billion in the manufacture of electric cars for the China market.

Meanwhile, the Taiwan government’s subsidy-driven strategy has worked for Gogoro scooters, which retail for just NT$73,000. With a government subsidy of roughly NT$30,000, the e-scooter becomes affordable for most Taiwanese consumers.

Such a policy is less feasible for automobiles, however. Even a cheap car costs about NT$600,000 in Taiwan, more than eight times the price of a Gogoro scooter without a subsidy. Since median salaries here have barely increased in two decades, a new car is out of reach for many citizens.

A government program to boost new-car sales – not specifically electric automobiles – provides an NT$50,000 rebate on commodity taxes to consumers who purchase a new car within six months of scrapping or exporting their used vehicle. Following the policy’s implementation last year, new-car sales rose just 4.5% in 2016 to 439,629 units, according to the Taiwan Transportation Vehicle Manufacturers Association (TTVMA). Still, the number of cars sold was the highest in a decade.

Already there are signs that the subsidy scheme is running out of gas, however. This year, despite the Taiwan economy’s recovery, new car sales through October fell 4.3% year-on-year to 355,768 units.

Bumps in the road  

A priority for Taiwan’s EV initiative should be the development of necessary infrastructure for recharging batteries, industry experts say. At present, “the infrastructure here is super nascent,” says Terrence Johnsson, managing director of Audi Taiwan.

Johnsson notes that Taiwan currently has about 200 low-speed 240-volt alternating current (AC) ports. Easily convertible to higher or lower voltages with a transformer, AC electricity is widely used in homes and businesses. AC charging ports function by sending electricity to a vehicle’s onboard charger, which converts it into power the battery can use. Since the onboard charger is small, it sends a limited amount of power (3-6 kW) to the vehicle’s battery. Charging is thus fairly slow.

While it’s possible to build a more powerful onboard charger, that could drive up the retail price of an EV considerably, according to the New Zealand-based Electrical Vehicle Charging Network.

Johnsson recommends that Taiwan install more 500-volt direct-current (DC) charging stations. These high-speed chargers supply power directly to a vehicle’s battery rather than going through the onboard charging device. Equipped with smart technology that adjusts the charge level according to the condition of the battery, they are more versatile than AC ports, and of course faster. A vehicle can be charged to 80% capacity in about 30 minutes with DC, compared to several hours by AC.

Iconic electric-vehicle maker Tesla offers both charging options. Its Level 2 Destination Chargers (installed in restaurants, hotels, and shopping malls – the “destinations” of Tesla drivers) are AC-powered, while its Supercharger network for long-distance driving features DC fast-charging stations. The Supercharger provides up to 170 miles of range in just 30 minutes, according to Tesla’s website. In Tesla’s home market of the United States, there is a growing national network of Superchargers.

Installing a large network of high-speed DC chargers in Taiwan would be a major undertaking, however. It requires both building the charging stations and ensuring that the grid can support higher electricity demand – often in locations that do not yet have that capability. As a result, says Johnnson, the Taiwan Power Co. (Taipower), the state-owned utility, “has to take a leading role” while auto-makers such as Audi “can bring technology to enable high-speed charging.”

Some observers worry that Taiwan’s grid is unprepared for the task. In August, a massive blackout hit northern Taiwan, knocking out power in 6 million households and causing estimated losses of US$3 million to businesses. Gas supplier CPC Corp. said that “human error” and “structural problems” at one of its plants, where equipment was being changed, affected operations at a Taipower plant, causing the blackout.

The incident followed weeks of dire warnings about dwindling electricity reserves, casting doubt on Taiwan’s stated goal of going nuclear-free by 2025 while also sharply cutting greenhouse-gas emissions. In response, the Tsai Ing-wen administration has doubled down on its promise. In a Facebook post after the blackout, President Tsai said that the episode only “made us more determined.”

Following the blackout, Japan’s Nikkei Asian Review reported that the Taiwan government was considering requesting assistance from Tesla to set up lithium ion battery facilities for renewable energy storage. Tesla is already setting up such facilities in California and Australia.

Tesla dominates the still-small electric car market in Taiwan, taking a 95% market share. PHOTO: TESLA

Tesla as pioneer

To be sure, automakers do see opportunity for EV sales in Taiwan. In fact, Tesla, perhaps the world’s best-known EV maker, entered the Taiwan market in July 2016. The company has not released sales figures for Taiwan and declined to respond to requests for comment from Taiwan Business TOPICS, citing a company policy that permits only CEO Elon Musk to speak on Tesla’s behalf.

MIC’s Lu reckons that Taiwan’s premium auto market offers Tesla some good opportunities. To access them, “Tesla will need to highlight its advanced technology, since Taiwan’s affluent consumers regard electric vehicles as a representation of wealth and social status,” he says.

One possible complication is that Tesla charging stations are compatible only with Tesla vehicles. Tesla users may appreciate that exclusivity, Lu observes, but since the Taiwan government is unlikely to be willing to subsidize charging stations that serve only a single brand, Tesla and its customers will need to cover all the related costs themselves.

Currently 95% the electric vehicles on Taiwan’s roads are Teslas (about 500 in total), says Michael Hsu, a Kaohsiung-based furniture maker who owns an NT$6 million Model S, which he drove around the entire island in March. He says he was the first person to accomplish that feat.

For Tesla drivers, worry about range is a thing of the past, Hsu says. “I felt range anxiety once when I left Taipei with only 300 kilometers on the battery, since Kaohsiung is 350 kilometers away,” he recalls. But after making a brief pit stop in Tainan, where he charged the vehicle for 40 minutes, he was back on the road.

Thus far, Hsu is satisfied with the vehicle, which he says has never given him mechanical problems. He notes that Tesla provides 24-hour support for owners – every car has a SIM card and the company can dial it directly to diagnose problems.

Further, Hsu says that Tesla owners in Taiwan can easily get support from overseas owners clubs – especially in the United States. Some Tesla drivers there have owned their vehicles for years and may be even more familiar with them than technicians in Taiwan.

Hsu also expresses satisfaction with Tesla’s proprietary charging network in Taiwan, but urges the government to improve the overall EV infrastructure. “A lot of public chargers are not being maintained,” he observes. “People go there to charge and find that it’s broken.”

A recent Mercedes-Benz promotion. The company, which enjoyed record sales in Taiwan in 2017, plans to introduce a large number of electric models in the years ahead. PHOTO: MERCEDES-BENZ

The way forward 

In an emailed response to interview questions, Mercedes-Benz said that it would take several years before electric vehicles achieve significant market share in Taiwan. Hindering rapid adoption is the “critical electric power supply situation and the insufficiency of EV infrastructure,” the company said, adding that the government should consider sweetening incentives for consumers to buy EVs while “speeding up Taiwan’s readiness” for them.

The German automaker suggests that the government extend subsidies to a wider variety of low-emission technology passenger vehicles, such as plug-in hybrid electrical vehicles (PHEV). Those “are an ideal interim alternative for reducing emissions as long as a nation-wide charging system is not available,” the company says.

Looking ahead, Mercedes-Benz has big plans to boost the share of electric vehicles in its portfolio. In an October press release, the company said it would launch more than 10 purely electrically driven vehicles by 2022. “Over and above this we shall electrify the entire Mercedes-Benz portfolio,” Ola Källenius, the company’s head of sales and marketing, said in the press release, adding that the German automaker would eventually offer 50 different electrified models.

Ford has ambitious plans for electric vehicles as well. In October, the company announced the creation of a dedicated team to accelerate EV development. That move follows Ford’s Dec. 2015 announcement that it would invest US$4.5 billion in EV development by 2020.

“Electrification of vehicles is a trend that cannot be stopped,” says Ford Lio Ho’s Ju. Yet for Taiwan, “the government needs to set a clear direction. Then and only then can everyone plan and invest.”

Audi’s Johnsson notes that Taiwan is expected to soon adopt the Euro 6 emissions standard – Europe’s most stringent yet – which could serve as a catalyst to develop the EV market. “Once you adopt Euro 6, a certain number of vehicles on the road have to be electric, or you can’t meet the standard,” he observes.

Adopting Euro 6 would dovetail with the government’s NT$36 billion Clean Air Action Strategy initiative, which aims to reduce average annual PM2.5 concentration by 18.2% by the end of 2019.

Meanwhile, increasing consumer acceptance of EVs will also be critical to taking them mainstream in Taiwan. In an interview with Taiwan Business TOPICS, Quincy Davis, a U.S.-born professional basketball player in Taiwan and owner of an electric BMW, offered some insights on how the public sees EVs here. “I bought the car because I think it’s important to reduce auto emissions,” he says. “But I’ve always been environmentally minded. That’s not a priority for everyone who purchases a car.”

When Davis sought to have a charging station installed in the garage of his previous apartment building, he encountered resistance from building management. Had there been other drivers of electric vehicles in his building, “I think it would have gone over better,” he says.

Davis has been able to make do charging the car at various locations around Taipei City. Since he uses it mainly for city driving, a charging station is never too far away, but a road trip to Kenting is not feasible. He hopes to see additional charging infrastructure set up nationwide and urges more education of consumers about the benefits of electric vehicles.

Before making a switch from traditional gasoline vehicles, “consumers have to first see that electric vehicles can be practically operated in a wide range of traffic environments,” observes TrendForce’s Lu.

Taipei 101, once the world’s tallest building, promotes its recharging facilities for electric vehicles. PHOTO: MATTHEW FULCO

“On the whole, the development of Taiwan’s electric vehicle market is stuck as a discussion topic,” he says. For that to change, Taiwan must move beyond relying on subsidies to lift vehicle sales, build necessary infrastructure, and strengthen consumer acceptance of the technology.

“Without these developments, the EV market in Taiwan will remain limited in terms of scale and geographical area,” Lu concludes.