It’s Time for Nigeria to Plug-In: Localising the E-Mobility Supply Chain
Byencit Duncan*
The transportation sector accounts for approximately 23% of global energy-related greenhouse gas emissions, with roads accounting for 72% of this. Governments all over the world are pushing for the adoption of electric mobility to combat climate change, with China and Europe leading the way. France and England plan to ban the sale of fossil fuel-powered vehicles by 2040, while Germany is offering substantial financial incentives to consumers to purchase EVs. Although these government incentives granted to EV producers and consumers are not the primary drivers of EV adoption, when parity in the total cost of ownership and own ability is achieved, EVs will begin to generate considerable sales.
Africa is not left out of the EV wave with South Africa taking the lead in terms of E-Mobility adoption with over 180 charging stations. In the meantime, Kenya and Rwanda have established tax breaks to encourage the import of electric vehicles and are developing their own electric two- and three-wheelers. In Nigeria, the business sector is pushing for its adoption, with several automobile manufacturers such as Jet Motors, Max.ng, Stallion Motors, etc. launching electric vehicles, including two and three-wheelers.
It has been discovered that the majority of Nigerians have at least a rudimentary understanding of the subject of electric vehicles. Only a few months ago, Stallion Motors launched the first domestically made EV Hyundai Kona. GIG Logistics, Max, and Jet Motors are among the road transport companies that have entered this industry.
The electricity situation in Nigeria is a key barrier that reduces the appeal of E-Mobility. About 85 million Nigerians do not have access to grid electricity, representing 43% of the population, thus making Nigeria the country with the largest energy access deficit in the world. The 2020 World Bank Doing Business report ranks Nigeria 171 out of 190 countries in providing electricity access despite this, the Nigerian electric vehicle market is making progress.
The adoption of E-Mobility will have a significant impact on the automotive supply chain currently posing a risk to auto suppliers. The influx of electric vehicles into the auto market could be a potential challenge for auto suppliers with large stock Internal Combustion Engines (ICE) vehicles/parts in their sales garage. If the taste of consumers of auto products aggravates towards emissions vehicles, then the challenge of selling off the already acquired high volume of ICE vehicles/parts falls on auto suppliers, with strong signals of financial loss to their business. Suppliers must consider major markets where the technical and regulatory landscape, as well as consumer preferences, are captured. A rigorous examination of product portfolios is required to determine which components of Internal Combustion Engines (ICE)/fuel-gas cars may suffer a slowing down in demand as EV sales increase.
An ICE runs on gasoline burned internally to power the car while an electric vehicle is powered by electricity; EVs use motors whereas ICE/gas-powered gas requires an internal combustion engine. This difference affects the whole value chain, seeing as there is now an increased demand from users of electric vehicles on the grid for the charging of their vehicles. Whilst ICE is more dependent on fossils, there is a chance that e-vehicles may have nothing or little to do with this energy source and therefore be considered to not have the kind of harmful effect that ICEs puts on the environment. The transport sector, which is the largest contributor to greenhouse emissions, produces 61% of the world’s CO2, significantly affecting the climate.
Major systems critical to ICE vehicles, particularly engines, are lacking from EVs. Spare part suppliers, such as exhaust systems, fuel systems, and transmissions, may encounter commercial disruption as the EVs gain traction. A handful of Nigerians in the automotive industry work within its supply chain either as suppliers of spare parts or specialised mechanics; as E-Mobility begins to creep into the automotive system, these businesses will be shaken and those which lack financial flexibility and digital expertise are more likely to struggle. Although EV sales will expand slowly, providers should begin planning for the future by doing research and building business models to sustain the adoption of EVs to stay in business.
As the electricity market in Nigeria grows, it is generating a disruption in the internal combustion engine supply chain, as 25% of the ICE supply chain does not translate to the EV supply chain, necessitating a change for companies, organizations, and individuals in that line. To stay in business, these people will need to go through some form of restructuring and planning that will facilitate their transition. These companies already well-positioned in the automobile market will need to redirect their focus and source for streams relevant to the E-Mobility market which they can easily capitalise on. They might shift to producing necessary E-mobility components such as batteries, chargers, and plugs, as well as non-essential components such as seats, motors, frames, and lighting.
Another major stream to capitalize on will be battery production. According to the Bank of America global research report (BAC), there is a foreseen threat that the battery supply will run dry as early as 2025 due to the present and future rise in demand for lithium batteries. Companies such as Tesla, BMW, Volkswagen, Ford, other OEMs and many more are investing a whole lot in the securing of Lithium supplies and diversification of supplies for battery and battery pack production. Creating an efficient EV battery supply chain will be paramount for EV companies. This can be done by securing essentials for battery production such as electrolytes, electrodes, cathodes, anodes etc. There is therefore a need for more companies to dive into the market as it will lead to diverse supplier agreements from companies.
Charging systems is another area to look into, automobile manufacturers or supply chain players can decide to go into the production of the E-Mobility chargers either for home use or for Public use or even for mobile charging stations. Setting up charging stations and partnering with EV companies or mini-grid developers to supply power is also viable for them.
The government is not left out of this transition and can first begin by creating awareness and sensitising citizens on E-Mobility, its effects, its benefits, and its impact on the society and environment at large. Enabling a suitable environment for the smooth transition of the supply chain through policies and frameworks that will support the switch and inevitable transition. The Government can encourage local production and manufacturing of EVs within the country through incentives and plan subsidies for importation or purchase of raw materials needed for the production. These incentives will also encourage the acquisition of parts associated with E-Mobility to further ease the transition. Also, import duties for e-mobility components and structures can be removed or lowered to favour their importation.
Byencit Duncan* is a Research Analyst at Clean Technology Hub.
