April 22, 2024
Asia (Japan, South Korea, China, India, ASEAN) Fuel Efficient Vehicles

Emerging Markets Drive Demand for Fuel Efficient Vehicles in Asia

Asia is home to some of the fastest growing auto markets in the world. Rapid economic development and rising incomes have led to surging vehicle ownership across major countries like China, India, Japan, and South Korea. However, this growth has also caused serious issues with traffic congestion, air pollution and dependence on imported oil. To address these challenges, Asian governments and automakers are aggressively pushing for more fuel efficient and environment-friendly vehicles. This shift is being led by strong policy support as well as changing consumer preferences towards green mobility solutions.

Rising Pollution Levels Spur Regulatory Push for Fuel Efficiency

Several Asian cities now rank among the most polluted in the world due to vehicle and industrial emissions. In response, governments have introduced stringent fuel efficiency and emission norms aligned with international standards. China recently implemented the China 6 standard for new vehicles equivalent to Euro 6, while India will introduce BS-VI norms in 2020 to reduce sulfur emissions. Japan and South Korea already have some of the strictest fuel economy standards globally through their Top Runner program and Corporate Average Fuel Economy scheme respectively. Non-compliance can lead to heavy fines, restrictions on sales or import/export of non-compliant vehicles. These regulations are forcing automakers to develop more fuel efficient powertrains and technologies.

Automakers Introduce Electric and Hybrid Vehicle Models

To meet evolving regulations, automakers across Asia are accelerating investments in electric and hybrid vehicles. In China, which is the world’s largest EV market, over 25 manufacturers offer 170 EV models. Sales of new energy vehicles grew 62% in 2018. Chinese brands like BYD and BAIC dominate with affordable commercial EVs. Meanwhile, Japan’s Toyota is a leader in hybrids with its popular Prius and Crown models, while Nissan has found success with the all-electric Leaf. South Korea’s Hyundai and Kia too are strongly promoting their Ioniq and Niro hybrids and EVs. Even domestic players in India like Tata and Mahindra have brought electric SUVs and commercial vehicles. Automakers expect hybrids and EVs to account for 10-15% of their new vehicle sales in Asia by 2025.

Developing Charging Infrastructure to Drive Mass Adoption

Lack of adequate public charging infrastructure has been a key barrier to wider EV Asia (Japan, South Korea, China, India and ASEAN) Fuel Efficient Vehicles  adoption. However, Asian governments are now investing heavily to build an extensive fast-charging network across major cities and highways. In China, the State Grid Corp plans to install over 4.8 lakh charging points by 2020 under its National Charging Standards. Similarly, India’s EV policies provide subsidies to private and commercial EV owners to set up charging stations. Japan has set a target of developing over 20,000 quick chargers by 2030 through joint-ventures between utilities and automakers. South Korea too plans a nation-wide EV charging network under its Green New Deal program. A robust charging ecosystem will help address consumer anxiety over range and develop EVs as a long-term alternative to gasoline-powered cars.

Tax Breaks and Subsidies Encourage “Green” Vehicles

To promote green mobility solutions, Asian governments offer direct subsidies and tax benefits to EV buyers as well as automakers. For instance, China provides direct purchase subsidies of up to $7,500 for buying EVs, with total incentives reaching over $3 billion annually. The Japanese government subsidizes 50% of the cost of installing home-charging stations while Korea exempts EVs from acquisition taxes. India too offers an income tax deduction of Rs. 1.5 lakhs on interest paid for EVs along with state-wise purchase incentives. Automakers like BYD in China and MG Motor in India gain additional benefits for localizing EV component manufacturing. Such fiscal mechanisms play a key role in making electric options more affordable for first-time buyers and bridging the cost-gap with conventional vehicles.

Consumer Trends Favor Fuel Efficient Options

Changing consumer preferences, especially among younger generations, also favor more environmentally friendly mobility solutions. A 2017 survey found over 70% of Chinese respondents willing to buy hybrid, plug-in hybrid or electric vehicles. Similarly, more urbanized and educated Indian consumers are actively considering hybrid SUVs and hatchbacks due to lower running costs. Younger demographics in developed markets like Japan and South Korea also favor compact EVs or hybrids due to lower emissions. Rising awareness about air pollution and climate change is driving such attitudes. Automakers are tapping into this shift by highlighting green credentials of their vehicles through effective marketing campaigns. Over time, favorable policies and sustainable living trends will create a large addressable market for clean technologies in personal mobility across Asia.

1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it