ADOPTION OF ELECTRIC VEHICLES IN MALAYSIA — CONSUMER PREFERENCES AND COST-BENEFIT CONSIDERATIONS

1. Introduction

Passenger cars, which constitute 89.1% of the car market in Malaysia (Malaysian Automotive Association, 2024), are the key contributor of CO2 emissions (Ong et al., 2011). It is estimated that the CO2 emissions will reach approximately 41,790 tons per day if liquid fuels continue to be used for passenger cars, and this amount will be simply too huge for a small country like Malaysia. As such, GreenTech Malaysia (rebranded as Malaysian Green Technology and Climate Change Centre of MGTC in 2019), the agency in charge of development and promotion of green technology, has been aggressively promoting electric vehicles (EVs) adoption in the country. With hybrid vehicles (HVs) leading the alternative vehicles market since 1997, plug-in EVs and battery EVs subsequently entered the Malaysian automotive sector and now command 68% of total EV sales (Nizam, 2023). The very two first EVs — Mitsubishi and Nissan¹ — were introduced into the Malaysian automobile market in 2013 and public recharging stations were constructed to provide convenience for EV users. In 2015, GreenTech Malaysia introduced ChargEV (charge EV) a public EV charging station network. By 2023, 1246 public EV chargers were installed at Petronas petrol stations, shopping malls, hotels, and other selected public areas (Sallehuddin and Basyir, 2023). Besides, ChargEV also rolled out its mobile apps to assist EV users to locate the nearest charging station. In Budget 2022, the government introduced a road tax exemption for battery- and fuel cell (hydrogen)-powered EVs tax until December 31, 2025, and subsequently extended for another two-years until December 31, 2027.

Malaysia aims for 38% usage of EVs by 2040 and 80% by 2050 in line with the National Energy Transition Roadmap 2023. The near-term target of 2030 is to have 125,000 EVs on Malaysian roads, of which 50,000 are expected to be private EVs. As of December 2021, there were around 31,000 EVs registered in Malaysia (Malaysian Automotive Association; cited from Adlan, 2023). The demand for EVs among Malaysian consumers (private users) is considerably low, accounting for 0.4% of total vehicle sales.

Following which, many studies have been carried out to evaluate the acceptance and adoption of EVs and other environmentally friendly alternatives (internal combustion engine/ electric HV, solar powered vehicles, fueled EVs, as well as EVs that apply flywheels or super capacitors). Namely, various factors have been considered in assessing the Malaysian consumers’ purchasing behavior of alternative vehicles, such as relative advantage of alternative vehicles as compared to internal combustion engine vehicles (ICEVs), the compatibility of alternative vehicles, the behavior of consumers towards environmental-friendly vehicles, and individual and environmental consequences of utilizing alternative vehicles.

It is however equally important to evaluate the economic and environmental costs and benefits — upfront purchase price, operational cost, and fuel efficiency (Sang and Bekhet, 2015) — of alternative vehicles in comparison to ICEVs as they affect consumers’ purchase intentions These studies are lacking in the Malaysian context. Hence, this study extends previous work to examine consumer purchase behavior of EVs through a market survey conducted in Klang Valley. Then follows a comparative economic and environmental cost-benefit analysis of EVs relative to ICEVs and HVs to provide some understanding on the market diffusion of the former.

The remainder of the paper is organized as follows. Section 2 reviews related studies on the economic and environmental costs and benefits of EVs vis-à-vis conventional vehicles. Then follows a description of the purchasing behavior model specification, the cost-benefit method and the data employed for the study in Section 3. Section 4 presents the results and discusses the findings of the study. Finally, Section 5 concludes.

2. Literature Review

In analyzing the costs and benefits of alternative vehicles, namely HVs, EVs as well as fuel cell vehicles, many researchers (Carlsson and Johansson-Stenman, 2003; Zito and Salerno, 2004; Simpson, 2006) have applied the cost-benefit method by considering various variables that provide insights into consumers’ purchasing decisions on alternatives vehicles. The cost-benefit benefit analysis is considered a useful method for decision making process for long term investment (Piao et al., 2014).

In the cost and benefit analysis model, sub-models are included, such as cost model, mass balance, energy-use model, performance model, and result post-processing (see Simpson, 2006). Vehicle costs are generally evaluated by calculating their life cycle costs (Zito and Salerno, 2004; Lajunen, 2014; Simmons et al., 2015), which include costs of energy storage system replacements, operating costs (fuel or energy cost, vehicle tax, general or exhaust inspection cost, and maintenance and repair cost) and capital or investment costs. Other studies include additional cost variables, such as ownership cost (Sharma et al., 2012; Propfe et al., 2012; Al-Alawi and Bradley, 2013) that goes beyond operating cost to include purchase (retail) price and expected resale price (Piao et al., 2014; Falcão et al., 2017; Creti et al., 2018). In the case of emission costs, Falcao et al. take a step further to consider CO2 emissions from electricity generation for EV, that is from the production and disposal of the traction battery.

Clearly, the types of costs considered in the cost-benefit evaluations of alternative vehicles differ considerably across studies. For example, Lipman and Delucchi (2006) analyze the lifecycle and retail costs of hybrid EVs and cover a comprehensive set of costs of hybrid EVs, which include vehicle capital cost, battery, tray and auxiliary costs, fuel costs, insurance costs, maintenance and repair costs, engine oil costs, tire replacement costs, parking, tolls, fines and accessories, registration fee, vehicle safety and emission inspection fee as well as federal, state and local fuel excise taxes.

Different models have also been deployed in the cost-benefit assessments of alternative vehicles. For example, Simmons et al. (2015) conduct a cost and benefit assessment on new technologies of vehicle and fuel economy in the United States (US) using the model-specific and classification-average approaches. Under the model-specific approach, the changes of technologies are compared with a particular base model, while the classification-average approach is based on sales-weighted average criteria for each vehicle class. Alternatively, the cost-benefit analysis by Vasconcelos et al. (2017) is grounded on an agent-based model stimulation with agents like users, and car sharing operators.

Others distinguish the cost-benefit analysis between individual user and social level (Lipman and Delucchi, 2006; Ito and Managi, 2015; Norbu, 2015). In the individual user analysis, the costs and benefits for individual users are assessed by considering the models under comparison and various parameters, while for the social level analysis, the results are aggregated and included with other prerequisite investments that need to be undertaken by the government as well as the monetized value of intangible emissions. Among the afore-mentioned studies, Norbu finds that most of the potential buyers are discouraged by the unreasonably high upfront costs in purchasing an EV and suggests that the battery costs should be reduced to implement the utilization of EVs on a large scale.

There are also several studies (Simpson, 2006; Pesaran et al., 2007; Villar et al., 2013; Simmons et al., 2015; Ito and Managi, 2015) that analyze the costs and benefits between different types of EVs. For example, Xiong et al. (2008) carry out a comparative economic analysis of three hybrid EVs solutions, namely a parallel system with integrated-starter generator (ISG) and dual clutch (DCP), a parallel system with ISG and single clutch (SCP) as well as plug-in series system (PIS). The results show that PIS, though the best in terms of fuel efficiency, faces the highest ownership cost due to high battery cost. Similarly, the findings of Thomas (2009) indicate that the battery EV is more advantageous than fuel cell EV as it has lower fuel cost per kilometer, less consumption of wind or solar energy per kilometer, and greater access in fueling capability at the initial stage, but the former comes with a higher life cycle cost. Salisa et al. (2011) further adds that when comparing the novel plug-in hybrid EV with the hybrid EV, the former in a high congestion cycle achieves higher all-electric range and lower electricity consumption as more regenerated energy is obtained with improved capability, and when braking action is associated with a great number of stop-start events.

Most cost-benefit evaluations, as discussed above, compare alternative vehicles to conventional vehicles (Massiani, 2015; Vasconcelos et al., 2017; Creti et al., 2018). Creti et al. consider different scenarios, such as technologies used to produce hydrogen for fuel cell EV for different periods, or breakthroughs in battery technology for EV (Carlsson and Johansson-Stenman, 2003) over time. A long-time horizon is an important factor for the diffusion of EVs (Ito and Managi, 2015; Simpson, 2006) as total ownership cost of EVs is found to be economically superior to conventional vehicles only after several years (Sharma et al., 2012; Falcão et al., 2017). That is, increases in CO2 abatement cost and petrol price will reduce the payback period of EVs (Al-Alawi and Bradley, 2013; Salisa et al., 2011; Ito and Managi, 2015; Falcão et al., 2017). The difference between the net present value of costs and benefits of alternative EVs is then used as a welfare measure of utilization of alternative EVs.

The common findings from previous studies are that the high initial acquisition cost² of EVs (though can be offset by higher expected resale price; Propfe et al., 2012) and the life of battery are the major causes that affect the short-term economic feasibility of (different types of) EVs, and subsequently their diffusion. The economic feasibility of EVs undoubtedly is the reduction of CO2 emissions (Falcão et al., 2017; Vasconcelos et al., 2017). That said, the private cost-benefit analysis would differ from a social cost-benefit analysis. Some examples of social benefits include improved environmental performance of EVs if nuclear power and renewable energy (see also Granovskii et al., 2006; Nanaki and Koroneos, 2013; Zhang et al., 2013) are applied in their electricity generation mix (or carbon-free electricity generation), if energy is captured via regenerative braking (Salisa et al., 2011), and if smart charging strategy based on one-day-ahead prediction is deployed.

To investigate changes of net present values (NPVs) under different given conditions and parameters, a sensitivity analysis is also conducted in many studies. The parameters that are commonly used by researchers in the sensitivity analysis are annual travel mileage (Piao et al., 2014; Falcão et al., 2017), fuel and electricity price (Delucchi and Lipman, 2001; Sharma et al., 2012; Piao et al., 2014; Simmons et al., 2015; Massiani, 2015; Ito and Managi, 2015), battery price, battery lifetime, technological advancement, air pollutant abatement cost and regulation policy.

3. Purchase Behavior and Cost-Benefit Assessment

3.1. Consumer preferences towards EVs

A survey was carried out between January and August 2021 to collect primary data on consumers’ preferences towards EVs in Malaysia. Based on the theory of planned behavior (developed out of the theory of reason action), and previous related works on Malaysia (Sang and Bekhet, 2015; Hong et al., 2015; Afroz et al., 2015; Al-Amin et al., 2016; Adnan et al., 2017, 2018), a questionnaire was designed to consider five domains of purchase behavior – purchase intention³ of EVs (PI), attitude towards EVs (ATT – degree to which a consumer has a favorable or unfavorable evaluation of the behavior in question), environment concern (EC – awareness, adequate knowledge and pro-environment behavior), subjective norm (SN – motivation a consumer receives from family, friends, and colleagues), perceived behavioral control (PBC – level of control perceived by consumer over external factors) and personal norm (PN – a consumer’s perceptions or beliefs). All five domains and the corresponding items (less than 10 for each domain) in the questionnaire were measured by using a five-point Likert scale; with options ranging from strongly disagree to strongly agree. Other information gathered from the questionnaire includes demographic information of respondents, namely gender, age, marital status, educational level, occupation, and household income. (Table A.1. provides a profile of the respondents.)

The estimating equation is specified as follows :

Convenient sampling method was applied to collect data from the respondents and the formula below is used to obtain the appropriate sample size for the survey (Afroz et al., 2015). where n is the sample size, $\pi$ (0.50) is the population proportion, Z is the standard normal value, which corresponds to the desired confidence level, and E is the maximum allowance error. With a confidence level of 95%, Z is 1.96, $\pi$ is 0.50 and E is 5%, n is 384.16. Hence, we increased the sample size to 400 after considering a 5% non-response error. A total of 450 questionnaires were distributed to the respondents in two states of Malaysia, Selangor, and Wilayah Kuala Lumpur, of which 444 valid questionnaires were included in the data analysis.

3.2. Cost-benefit analysis

The cost-benefit analysis is employed in this study to evaluate the economic and environmental costs and benefits between ICEV, HVs and EVs. The total benefits and total costs are calculated through the diffusions of HVs and EVs, in replacing the ICEV. The reduction in the usage of petrol when replacing ICEV with HVs or EVs is taken as the benefit, while the purchase cost and operating cost of the vehicles are considered as the total costs in this study. The total benefit and total cost will be discounted to a present value evaluated in 2020 prices. A NPV is estimated by subtracting the present value of total benefit with the present value of total cost.

3.2.1. Total benefits

The benefit, $B_{t,m}$, of replacing an ICEV with an alternative vehicle, m (for example, a HV or an EV) in year t is calculated as

${\text{ER}}_{t,m}$ is the reduction in petrol usage in replacing ICEV with an alternative vehicle. The price_t indicates the price of petrol per liter.

The reduction in the petrol use, ${\text{ER}}_{t,m}$ in year t is calculated as

where ${\text{CAV}}_{t,m}$ is the cumulative number of alternative vehicles, which represents the number of ICEVs replaced by a HV or EV from year 2020 until year t. $E_{\mathrm{\text{ICEV}}}$ and $E_m$ are the usage of petrol per kilometer traveled, for ICEV (ICEV) and alternative vehicle (m), respectively. TD is the total distance traveled in a year.

Next, the discounted present value of the total benefit, TB_m of replacing an ICEV with an alternative vehicle is calculated. The benefits $B_{t,m}$ of each year from year 2020 to target year, T when 5 million alternative vehicles are diffused in the market are discounted with a discount rate of 4% and evaluated in 2020 prices. (The target of 5 million alternative vehicles will be explained in the key assumption section). The discounted present value of the total benefit is subsequently obtained by summing up all the discounted benefits as

where i represents the discount rate of 4%.

3.2.2. Total costs

As most of the alternative vehicles, such as HV and EVs, are not being produced locally in Malaysia,⁴ this study will focus on the purchase costs and operating costs in evaluating the cost of replacing an ICEV with an alternative vehicle. The purchase cost will be the purchase price of a vehicle in 2020 and the operating cost covers the cost of refueling for ICEV as well as HV, and the recharging cost for EVs. The cost of replacing an ICEV with an alternative vehicle, $C_{t,m}$ is the sum of the difference of purchase cost and operating cost between an alternative vehicle and an ICEV:

where ${\text{NAV}}_{t,m}$ represents the number of alternative vehicles in each year, t. $C_{t,m,\mathrm{\text{purchase}}}$ and $C_{t,\mathrm{\text{ICEV,purchase}}}$ is the purchase cost in year t for an alternative vehicle, m and an ICEV, ICEV, respectively. The operating cost is represented by ${\text{C}}_{t,m,\mathrm{\text{operating}}}$ for an alternative vehicle, m and ${\text{C}}_{t,\mathrm{\text{ICEV,operating}}}$ for an ICEV.

$$C_{t,m,\mathrm{\text{purchase}}}=({\mathrm{\text{purchase}}\mathrm{\text{price}}}_m-{\mathrm{\text{battery}}\mathrm{\text{price}}}_m)+[{\mathrm{\text{battery}}\mathrm{\text{price}}}_m\times {(1-\mathrm{\text{RB}})}^{t-2020}],$$(7)

$$C_{t,\mathrm{\text{ice,operating}}}={\mathrm{\text{FC}}}_{\mathrm{\text{ice}}}\times {\mathrm{\text{RC}}}_{t,\mathrm{\text{ice}}}\times \mathrm{\text{TD}},$$(8)

$$C_{t,m,\mathrm{\text{operating}}}={\mathrm{\text{FC}}}_m\times {\mathrm{\text{RC}}}_{t,m}\times \mathrm{\text{TD}},$$(9)

where RB is the rate of reduction of battery price per year. The rate of reduction of battery price is included to account for technological advancement, also discussed in the sensitivity analysis section. FC_ICEV and FC_m represent fuel consumption per kilometer for an ICEV and an alternative vehicle, respectively. RC_ICEV is the refuel cost for an ICEV while RC_m is the refuel cost for a HV and the recharge cost for an EV.

Subsequently, the costs, $C_{t,m}$ of each year from year 2020 to target year, $T,$ are when the diffusion of 5 million alternative vehicles is discounted at a rate of 4% and evaluated at 2020 prices. The discounted present value of the total cost, TC_m is then obtained by adding all the discounted costs :

3.2.3. Net present value

A net present value, NPV is estimated to represent the result of the cost and benefit analysis of replacing an ICEV with an alternative vehicle. It is the difference between the discounted present value of total benefits, TB_m, and discounted present value of total cost, TC_m :

3.2.4. Key assumptions

In this study, the target years for the diffusion of alternative vehicle, namely HV and EV, in replacing an ICEV are assumed to be year 2029, 2069 and 2119, with an interval of 10 years (short term target), 50 years (mid-term target) and 100 years (long term target) from year 2020. In the calculation, it is also assumed that the diffusion of the alternative vehicle in replacing the ICEV remains the same throughout the years, that is, the number of vehicles replaced per annum will be varied with different target years. The closer the target of 2020, the more the number of vehicles replaced per annum. For example, when the target year is 2029, the number of vehicles replaced per annum will be 500,000 vehicles to achieve 5 million diffusions of alternative vehicles at the end of the target year.

Besides, it is also assumed that the initial construction cost and operating cost of recharging the station for EV are the same as the costs involved in building the petrol station. Hence, the initial construction cost and operating cost of recharging station and petrol station are not taken into consideration in this study.

3.2.5. Sensitivity analysis

In this study, there are two sensitivity factors to be considered in the cost and benefit analysis of replacing ICEV with an alternative vehicle, namely technological advancement, and price of petrol.

As more effective and efficient technology comes on board, the battery cost of alternative vehicles is expected to be reduced, bringing down the purchase cost of alternative vehicles, according to Nykvist and Nilsson (2015). In this study, the purchase cost of alternative vehicles from the base year 2020 will be recalculated each year based on the price of battery after discounting 14% annually to take into consideration technological advancement. It is assumed that the cost of the other more mature car components will remain constant throughout the years (Kloess and Müller, 2011). Hence, this scenario is defined as ‘Reducing Battery Price’ scenario. However, in another case, it is also assumed that technological advancement will not result in a reduction in the price of the battery. This is because to achieve further improvements in the battery’s technology, continuous investments to finance the costs involved in the process of research and development (R&D) becomes necessary. In that case, the battery price will remain the same even with better technological improvements. The second scenario will be defined as ‘Constant Battery Price’ scenario. Figure 1 presents the purchase cost of HVs and EVs spanning the 2020–2119 period for each different scenario of technological advancement.

The price of petrol is another important sensitivity factor because the future petrol price will affect the decisions of the consumers in purchasing ICEV or alternative vehicles that are fuel-efficient. The sensitivity of petrol prices is also investigated through price scenarios. The first scenario is the ‘Constant Petrol Price’ scenario where the petrol prices will be kept constant throughout the years until the target year, T. The then (27 February 2020) ceiling price for RON95 was capped at RM2.08 per liter. This ceiling petrol price is regarded as the baseline price and is therefore constant in the ‘Constant Petrol Price’ scenario. Alternatively, the ‘High Petrol Price’ scenario is where the petrol price increases yearly at 2.5% from the baseline price. The petrol price based on the two scenarios are presented in Figure 2.

3.2.6. Selection of vehicles for comparison

To compare the economic costs and benefits of alternative vehicles with ICEV, three models of vehicles that are available in the Malaysian market are selected (Table 1). The selected models are Nissan Leaf Gen 2 EV (2019), Honda Jazz 1.5 L Hybrid (2019) and Myvi 1.5 L AV (2020) which are all B-segment and hatchback vehicles and considered appropriate for comparison. For alternative vehicles, Nissan Leaf EV (2019) and Honda Jazz 1.5 L Hybrid (2019) represent the EV and HV segments, respectively, while Myvi 1.5 L AV (2020) is of ICEV.

4. Results and Discussions

In this section, the results are reported for the purchase behavior (intention) towards EVs based on the market survey. Then follows the results on total benefits, total costs, and NPVs of diffusion of 5 million alternative vehicles. The results are presented for replacing ICEV with HV, followed with the diffusion of EVs and finally, the sensitivity analysis results for both alternative vehicles are reported.’

4.1. Purchase behavior

Before running the simple linear regression (Equation 1) to analyze the data, the Cronbach Alpha test is carried out to investigate the reliability or internal consistency of the items for all the domains of the theory of planned behavior. The values of the Cronbach Alpha are more than 0.5 for all the domains (Table 2); hence the items are considered reliable.

The estimated regression results of the purchase intention (PI) towards EVs are reported in Table 3. Based on the R², 63.6% of the variation in PI can be explained by the variation of the independent variables in the model. With the exception for PBC, there are significant positive relationships between ATT, EC, SN and PN with PI. ATT and PBC have the strongest and weakest influences on the purchasing behavior of EVs, respectively. Specifically, the negative relationship between PBC and PI implies that when consumers do not have control over their behavior, this will reduce their interest in purchasing EVs. The results suggest low public awareness and understanding of the benefits of EVs (see also Nizam (2023)).

4.2. Benefits, costs and NPV of HV diffusion

In replacing ICEVs with HV, the total benefit derived from the latter is the reduction in petrol usage. For each kilometer, the HV consumes 0.04 L of petrol, while the ICEV consumes 0.05 L. By converting to a HV, the consumption of petrol can be reduced by 0.001 L per kilometer. Under the ‘Constant Petrol Price’ scenario, the highest total benefit gained through the diffusion of 5 million HV is RM8 billion for the middle-term target year while the lowest total benefit gained is RM4 billion in the short-term (Figure 3). Alternatively, for the ‘High Petrol Price’ scenario, the largest benefit is RM20 billion for the long-term target vis-à-vis the lowest benefit from the short-term.

From the results, it is obvious that the total benefits gained in short-term target are the lowest under both ‘Constant Petrol Price’ and ‘High Petrol Price’ scenarios. Hence, we can infer that the total benefits gained from replacing ICEV with HV will be greater in the longer time horizon, particularly when petrol prices increase.

From the cost perspective for HV diffusion (Figure 3), the difference in the purchase cost and the refueling cost of both HV and ICEV is considered. The purchase cost of HV is divided into its purchase price and its battery price to capture the reduction in the price of HV battery due to the technological advancement. Based on Figure 3, by focusing on the target years, the total cost for the diffusion of 5 million HV is the lowest for the long-term target and is highest in the short term, regardless of the different petrol and battery prices.

Hence, it can be inferred that the longer the time horizon, the lower the total costs of replacing an ICEV with a HV. For the short-term target, the total costs for a HV diffusion under both ‘Constant Petrol Price’ and ‘High Petrol Price’ scenarios are similar; RM135 billion under ‘Constant Battery Price’ scenario and RM125 billion under ‘Reducing Battery Price’ scenario. This suggests that the petrol price does not have a significant impact on a user’s choice of utilizing HV in the short term. However, for the middle-term and long-term targets, the petrol price does have an impact on the total cost of replacing an ICEV with a HV, where the total cost under ‘Constant Petrol Price’ scenario is higher than that of ‘High Petrol Price’ scenario. The reason being further increases in petrol price will reduce the total cost of utilizing the HV and subsequently result in higher substitution of ICEV with HV. In terms of technological advancement, when battery price is deducted due to technological improvement throughout the years, the total cost of utilizing HV is reduced significantly for all the target years, especially the short-term target where the total cost is reduced by RM10 billion, from RM135 billion to RM125 billion. The lowest total cost for HV diffusion, RM16 billion is obtained under ‘Reducing Battery Price’ and ‘High Petrol Price’ scenario for the long-term target.

The NPV for the HV diffusion is presented in Figure 4. There is only one instance of a positive NPV of RM4 billion when replacing an ICEV with a HV, that is for the case of reducing price of battery of HV due to technological development for the long-term target with increasing petrol price throughout the years. Even though the NPVs obtained are mostly negative, the NPVs for all the cases under the long-term target year are highest relative to the middle and short-term targets. This suggests that HV diffusion will be higher in the long-term when the petrol price increases and the battery price of HV is lowered from technological advancement, and thereby reducing the total purchase cost of HV.

4.3. Benefits, costs and NPV of EV diffusion

Like HV, the total benefit for the diffusion of 5 million EVs is captured by the reduction in the consumption of petrol when switching from an ICEV to an EV. An EV is recharged rather than refueled, it consumes zero petrol in its operation, but an ICEV consumes 0.05 L of petrol per kilometer. Hence, the total reduction of petrol consumption is 0.05 L per kilometer when replacing an ICEV with an EV.

Under the ‘Constant Petrol Price’ scenario, the highest total benefit gained from utilizing an EV is RM40 billion for the middle-term target and the lowest total benefit gained is RM22 billion for the short-term target (Figure 5). Under the ‘High Petrol Price’ scenario, the highest total benefit gained is RM102 billion for the long-term target and the lowest total benefit gained is RM26 billion for the short-term target. Clearly, the total benefit gained from switching ICEV to EV for the short-term target is the lowest in both ‘Constant Petrol Price’ and ‘High Petrol Price’ scenarios. Hence, like the case for HVs, the total benefit of reducing consumption of petrol by using an EV will be greater in a longer time horizon. Moreover, when the petrol price increases throughout the years, the total benefit gained from replacing an ICEV with an EV is higher than that when the petrol price is kept constant. The total benefit gained in short-, middle- and long- term targets under the ‘High Petrol Price’ scenario is consistently higher than that for the ‘Constant Petrol Price’ scenario. This is like the case of HVs where it is more advantageous for the consumers to utilize the EVs instead of ICEVs when the petrol price is increasing. However, the overall total benefit gained from utilizing an EV is higher than that of utilizing a HV. This is due to the zero-petrol consumption in operating an EV while petrol consumption cannot be avoided in operating a HV.

The total cost for EV diffusion as shown in Figure 5 is calculated by summing up the difference in the purchase cost as well as the difference in the operating cost between EV and ICEV. The purchase cost of EV is divided into purchase price and battery price to capture the effect of technological advancement in production of battery. The operating cost of EV is considered as zero in this study due to zero petrol consumption and based on the information from ChargEV, that is, after paying for an annual membership fee of RM240.00, the cost of recharging an EV at the recharge station is free of charge.

The total cost for EV diffusion is the highest for the short-term target at RM500 billion, while it is lowest at RM100 billion or less for the long-term target (Figure 5). Hence, it can be concluded that the longer the time horizon, the lesser the total costs for replacing ICEV with EV. Based on Figure 5, the overall total costs under the ‘High Petrol Price’ scenario are lower than that under ‘Constant Petrol Price’ scenario. Increases in petrol price over the years reduce the total cost of utilizing an EV. Reduction in battery price due to technological advancement will also reduce the total cost for EV. However, with current technology, the purchase cost of an EV is still much higher than that of a HV and this is the reason that the overall total costs of EV are higher than that of HV. The lowest total cost for EV diffusion, RM37 billion, is obtained under the ‘Reducing Battery Price’ and ‘High Petrol Price’ scenario for the long-term target.

Finally, the NPV is calculated for the diffusion of EVs under different petrol price and different battery price scenarios due to technological advancement (Figure 6). There are two instances of positive NPVs from replacing an ICEV with an EV, which are RM35 billion and RM65 billion, under the ‘Constant Battery Price’ scenario and ‘Reducing Battery Price’ scenario, respectively. Both cases are for the long-term target and ‘High Petrol Price’ scenario.

This explains that even with the highest initial purchase cost (see also Norbu (2015)), an EV can achieve greater total benefits than that of a HV in the long term if the petrol price keeps increasing and if battery price keeps falling with technological advancement.

4.3.1. Sensitivity analysis

Sensitivity analyses of NPVs for HV and EV diffusion are conditioned upon the two parameters, changes in petrol price, and changes in battery price due to technological advancement. The total purchase cost of a HV is RM87,367 and the battery price of the HV is RM5513. The battery price accounts for 6% of the total purchase price of a HV. The reduction in battery price due to advancements in technology plays a crucial role in determining the NPVs for a HV. The NPVs for all the cases under ‘Reducing Battery Price’ scenario are lower than that under ‘Constant Battery Price’ scenario. Besides, increasing petrol price is also an important factor that improves the NPV of replacing an ICEV with a HV. The NPVs obtained under ‘High Petrol Price’ scenario are higher for both ‘Constant Battery Price’ and ‘Reducing Battery Price’ scenarios under the short-, middle- and long-term targets.

In the case of EV, the battery cost is RM30,000 and the total purchase cost of an EV is RM188,888. The battery price takes up approximately 16% of the total purchase cost of an EV. Under the ‘Reducing Battery Price’ scenario, with an annual reduction rate of 14% in battery price, the reductions in battery price from technological advancement substantially cut down the initial purchase price of the EV, and subsequently reduce the total cost in replacing an ICEV with an EV. This can be explained by all the lower NPVs in ‘Reducing Battery Price’ scenario as compared to that in ‘Constant Battery Price’ scenario. On the other hand, due to zero utilization of petrol, an EV obtains higher NPVs under ‘High Petrol Price’ scenario in both ‘Constant Battery Price’ scenario and ‘Reducing Battery Price’ scenario for all target years. Rising petrol prices increase the total benefit of using an EV due to the total reduction in the usage of petrol when switching from the utilization of ICEV to EV.

Therefore, it can be inferred that the reductions in battery price due to technological advancement and rising petrol prices increase the total benefits obtained from using a HV and an EV and subsequently improve the NPVs of both diffusions. In short, the NPVs of HV and EV are sensitive to the change in battery prices and petrol prices.

5. Conclusion

From the survey results, it can be inferred that consumers in Malaysia have positive attitudes towards purchasing EVs. Contrary to expectations, however, perceived behavioral control which includes government tax incentives, sales incentives and fuel subsidy policy appears to not support the purchasing behavior of consumers. Plausible reasons are the inadequacy of information and knowledge about EVs, rendering consumers unable to take advantage of external factors that support the purchase intention of EVs.

The cost-benefit results of EVs and HVs vis-à-vis ICEVs, in turn, suggest that the total benefit from fuel savings through EVs or HVs will be greater in a longer time horizon, while the total costs of diffusion of 5 million vehicles for both EVs and HVs will decrease as the target years increase. This is mainly because of reducing operating costs from lower petrol consumption and battery cost. The results indicate that only in cases where the battery price is reducing due to technological advancement and the petrol price is trending upward, positive NPVs can be obtained in the long term for the utilization of both EVs and HVs. This is because the initial purchase costs for both alternative vehicles (EVs and HVs) are more expensive as compared to ICEVs.

To investigate the sensitivity of the results towards the changes in petrol price as well as technological advancement, a sensitivity analysis is conducted with two different scenarios applied on the petrol price as well as the battery price. It can be clearly seen from the calculations on total benefits, total costs and NPVs, the change in petrol price plays an important role in determining the NPVs for substituting the ICEVs with alternative vehicles. The total benefits and NPVs for both EVs and HVs are higher under ‘High Petrol Price’ scenario as compared to that under ‘Constant Petrol Price’ scenario. Also, the total costs for both alternative vehicles are lower under ‘High Petrol Price’ scenario than ‘Constant Petrol Price’ scenario. Likewise, total costs and NPVs are found to be sensitive to battery price, a proxy for technological advancement. The total costs (NPVs) of substituting the ICEVs with alternative vehicles are lower (higher) under the ‘Reducing Battery Price’ scenario as compared to that under ‘Constant Battery Price’ scenario. Hence, rising petrol prices and reducing battery prices will eventually cause HVs and EVs to be more attractive to consumers than the ICEVs.

The economic and environmental benefits and cost comparisons between alternative vehicles and conventional vehicles provide insights for consumers to understand the net benefits that they will obtain by substituting ICEVs with alternative vehicles. Since the EV market in Malaysia is in the initial stage of ecosystem growth and market expansion, the findings of this study suggest that stakeholders in the automotive industry and policy makers need to provide more information on alternative vehicles, namely the lower operating cost and long-term benefits of EVs (as evidenced in this study), the incentives available (tax exemptions, rebates and reduced road tax), and the state of the charging infrastructure development to consumers (individuals) to encourage EV adoption and sustainable transportation.⁵

A limitation of this study is that it does not consider the entire range of lifecycle costs of alternative vehicles, which include cost of material extraction, production cost, cost of maintenance and repair, vehicle tax and insurance premium. Hence, future research can incorporate these other lifecycle costs of alternative vehicles in the cost-benefit assessments of EVs vis-à-vis ICEVs.

Acknowledgement

This research is supported by the Universiti Malaya Impact-Oriented Interdisciplinary Research Grant (IIRG) (Grant No. IIRG007D-19IISS).

Notes

¹ The Malaysian EV market is now dominated by Tesla (taking the lead at 70% of total sales), Hyundai, and Nissan.

² Piao et al. (2014) opine that the gap of initial cost between EV and ICEV will reduce gradually when the volume of production of EV increases.

³ Intentions are considered the key predictor of actual behavior.

⁴ Local automakers are (Proton and Perodua) are only beginning to introduce EV models to the market.

⁵ Thailand is ahead in terms of offering better government support for EVs and in developing charging networks.