September 14, 2021
Earlier this year, I had the pleasure of moderating a panel discussion where investors gathered to discuss the risk profile of investing in charge points. Having worked with investments in developing countries for the past 20 years, it was refreshing to discuss with investors whose focus is elsewhere than the emerging markets. We discovered a lot of similarities but also big differences.
Electric mobility development is a global trend
The e-mobility sector is hotter than hot now, and the development is both rapid and fascinating. Anywhere you look in the world, it’s still quite new and definitely in a development phase. No one knows what’s going to happen during the next five years. There are a lot of firsts – and, indeed, even Finnfund decided to make our first investment in electric mobility only last year.
In Africa, the focus is generally on 2- and 3-wheelers. From a development financier’s point of view, it’s interesting that electric mobility provides a possibility to improve the mobility of rural areas where there are no gas stations. Solar powered charging may be the solution for those who live in rural communities to actually shorten their journeys and thus, improve their livelihood. From Lake Turkana Wind Power in Kenya, we have first-hand experience of what it means when a long journey to the nearest city gets shorter. Maybe, once again, the developing countries will leapfrog and implement electric mobility solutions quicker than anyone else as they don’t have the burden of an infrastructure created for fossil fuel vehicles? When we assess the impact of our investments, increasing accessibility is definitely one of the expected development impacts.
EVs are good for climate but crucial for health
Surprisingly for some, the impact on climate is not the main focus for these investments. It’s health. India leads the world in pollution-linked deaths– followed by China and Nigeria – according to a report by the Global Alliance on Health and Pollution (GAHP). Pollution was found to be the largest environmental cause of premature death on the planet, causing 15% of all deaths – some 8.3 million people. This was the main reason why we decided to invest in the charging infrastructure together with Fortum Charge&Drive in India.
My vision is that the change towards electric mobility will start in the cities through different kinds of taxi services. An example of this is EkoRent, currently expanding the activities of its electric taxi company in Nairobi with a goal to expand to other big cities in East Africa.
After that, the next step will be expanding to the rural regions where there may not even be a grid access – solar power is key here. Discussing whether electric vehicles are green or not of course has to do with the power source used to charge them. Our experiences from different types of solar power solutions strengthen my vision of solar-powered energy connected to electric mobility being one of the upcoming trends.
Market-specific solutions are key to success
In the panel discussion, I shared my experiences from the mobility exhibition in Delhi last year. Right before the pandemic hit, I had a chance to see what the future visions look like for car manufacturers. It was clear that all major (especially Asian) players were rushing into the EV market while at the same time it was obvious that a lot of work needs to be done in order to convince the consumers. A car is a big investment, and it’s understandable that new technology raises questions.
Different markets need different solutions. How people and goods are moved looks very different across our target markets. As I mentioned, in Africa the focus is on 2- and 3-wheelers. In many cities, the taxi services are based on mopeds and the drivers don’t have time to stop and charge the batteries – this is why battery swapping is the way to go. One of the reasons for switching to EVs is that it often increases the income for the taxi drivers as the battery swapping is cheaper than the expensive, traditional (exported?) fuels.
Investing in the chicken or the egg?
At the panel discussion, everyone agreed that the situation at hand is a “chicken or egg” dilemma where the charging infrastructure doesn’t develop unless there are enough users while at the same time there needs to be enough vehicles to drive the development of the charging infrastructure. Our investment in India focuses on improving the charging facilities in the biggest cities and of course, we had to think thoroughly about the risk levels, the market, the due diligence.
The way I see it is that there are no options: We simply need to find cleaner and cheaper travel alternatives. Without the infrastructure developing, there is a risk that the growth of the EV market in for example India will slow down.
I’ve been working with the energy sector for 20 years and witnessed many amazing innovations along the way. Right now, I think that the switch to electric mobility is one of the most fascinating developments there is. There is no lack of bold entrepreneurs and inspiring innovations but as the industry is still developing, many of the businesses are still at an early stage and thus not suitable for Finnfund’s investment. We expect all our investments to be profitable, environmentally and socially responsible and produce measurable development impact and I’m sure that with time, these requirements will be met.
It’s a privilege to be in the front row, to be a part of this massive change. We want to be among the forerunners and this is why we have already taken our first steps into investing in electric mobility.
Associate Director, Finnfund