Electric Cars in Russia: Drivers of Development and Prospects for Implementation
The HSE Project and Academic Laboratory for Economic Journalism, the Digital Media and Promotion Office and the HSE Public Relations Office present the second issue of the information and analytical digest titled Russian Economy: Aspects of Global Transformation Shift (available in Russian). It focuses on the development of electric vehicles in Russia, including various aspects and key players of the industry.
The digest includes a general news agenda, expert interviews on the prospects of electric vehicles and battery technology, an analytical overview of the current state and future prospects of the industry in Russia and worldwide, an overview of domestic market players, and a Tesla case study.
One of the most notable and important technological transformations is taking place in the global automotive industry. Electric cars, which only a couple of decades ago looked like fashionable toys, are becoming both an environmentally friendly and economically attractive means of transport.
Recent sanctions and the withdrawal of foreign carmakers from the Russian market present a dilemma for the country: should Russia try to catch up with the rest of the world by establishing full-fledged production of traditional internal combustion engine cars despite their growing lack of relevancy, or should it make the leap and jump on the ‘electric car’ bandwagon?
Understanding how this dilemma is resolved today, evaluating how electric vehicles have already penetrated the economy, and identifying the main vectors of its further development are the main objectives of this issue.
Conclusions and observations:
Electric cars are often seen as a greener technology and a step towards a zero-CO2 economy. This is one side of the coin. The other side is the development of unmanned vehicles, which naturally will be powered by electricity. On top of these two trends is the economics of electric cars, which is becoming increasingly competitive. Along with the development of technology, changes are also occurring in the concept of urban traffic organisation, the approach to the production process, and inter-industry synergy (including through recycling).
Whatever happens, electric vehicles continue to evolve: the growth rate of electric vehicle sales increased both during the COVID-19 pandemic and during the crisis events of 2022. In Russia, sales of new electric cars grew by 34% in the first 10 months of 2022, while overall sales of new passenger cars and light commercial vehicles fell by more than 60%.
Half of car owners in Russia are ready to switch to an electric car. Firstly, because it is environmentally friendly, secondly, because petrol prices are high, and thirdly, because an electric car is more economical to maintain and operate.
According to the Concept for the Development of Electric Vehicles in Russia, one in ten cars made in Russia will be electric by 2030. In eight years’ time, about 220,000 electric cars are planned to be manufactured in Russia every year, and the total number of electric-powered vehicles will exceed 1.4 million. The International Energy Agency (IEA) forecasts that there will be between 200 and 350 million electric cars in the world by that time.
According to the Ministry of Economic Development, Russia will be able to produce its own fully localised electric vehicles if it creates and develops domestic pull production in electrochemistry, electromechanics, and control electronics.
The battery accounts for at least 40% of the cost of an entire electric car. Various options for making electric cars cheaper are being discussed. For instance, batteries could be standardised and reused in stationary energy storage systems. Different financing and ownership schemes are also being considered, including those under which cars are bought without batteries and the latter are supplied through leasing.
Russia is gradually building up its own production of lithium-ion batteries for electric cars, and several lithium deposits are planned for development: rising prices for this metal on the global market make these projects economically feasible and profitable. The US Geological Survey estimates that Russia has 1 million tonnes of lithium reserves.
Eventually, all federal highways in Russia will be equipped with the necessary infrastructure and will be fully open to electric vehicles and drones.
As for the competitiveness and economics of two different technologies—the internal combustion engine and the electric motor—a great number of factors should be considered, emphasises Konstantin Trofimenko, Leading Expert at the Institute for Transport Economics and Transport Policy Studies at HSE University.
‘An electric car may be more expensive to purchase than a car with a traditional internal combustion engine, but it will be cheaper in operation—if only because it breaks down less often as it does not have as many mechanical parts inside. Although, of course, this depends primarily on the car's operating parameters.
Right now, electric cars are more expensive due to the rare earth metals used in the battery, but batteries tend to get cheaper as mass production develops. The technology is already becoming comparable in price. Economically, electric cars will be as affordable as those with internal combustion engines. This will happen by 2030, perhaps even sooner.
There will certainly be some new players, as demonstrated by Elon Musk and Tesla. Both Google and Apple have announced projects to produce drones, and non-electric drones are almost unthinkable in the future.
I don't rule out the possibility of completely new players and start-ups entering the market. I think we may see companies from other business sectors that are willing to invest in electric mobility.’
Alexander Kamashev, CEO of RENERA, believes that the global transition to electric mobility and the development of new technologies related to this area manifest an evolutionary process.
‘Electric cars are just a means of transport, while electric mobility is a transition to a new economic way of life, which includes new charging infrastructure and a different understanding of freight logistics and transportation.’
Alexander Kamashev does not expect any serious shortage of lithium with the mass production of batteries for electric cars, at least not in Russia:
‘The cost of lithium has increased by 800–1,000%. With this trend in metal prices, are sales of electric cars growing? Yes, they are. Is battery production growing? Yes, it is. This is factor number one.
Factor number two is that Russia has the world's third largest lithium reserves. The only problem is that it is more difficult to mine this element in Russia than in some other parts of the world. Developing Russian deposits did not look profitable before the cost of lithium skyrocketed. However, with the prices rising, such projects look more economically attractive.
As we can see, the electric mobility market is developing thanks to high lithium prices, and it's becoming economically feasible to mine this metal in Russia.’
Russian Economy: Aspects of the Global Transformation Shift is a regular digest containing in-depth reviews of trends in the development of Russian industries with a selection of positive practices, expertise, and market trends. The digest is primarily targeted at industry players, decision-makers, managers of interested companies, and the media. The first issue of the digest, ‘IT Industry: Workforce’, focused on Russia’s need to develop its digital economy and create technological sovereignty, which virtually no other country in the world can boast today.
Slower GDP growth rates over the last several years were brought about by changes on international markets and the exhaustion of transformational bonuses due to the transition from a planned economy to a market economy, and this slowdown proves the necessity of looking for new solutions for stimulating the economy. The authors of the paper ‘Structural Changes in the Russian Economy and Structural Policy’ conducted a large-scale analysis on structural policy in Russia and around the world, as well as on possible ways for this policy to develop further. The first presentation of the paper took place as part of the plenary session called ‘Structural Policy in Russia: New Conditions and a Possible Agenda,’ which closed out HSE’s XIX April International Academic Conference.
What is happening in the Russian economy, how can its growth be boosted, and why can it no longer develop through inertia? These were the issues discussed at the plenary session ‘Prospects for the Russian economy’ that took place as part of the XIX April HSE International Academic Conference.