Another retail thought leadership report brought to you in partnership with Retail Economics“LOCKERSUnlocking the final mileExplore thought leadership with Retail EconomicsWe can help you get the media coverage you need to elevate your business profile.Our research features regularly in these media outlets:Retail EconomicsDELIVERYREPORTIntroductionSection 1 The Delivery Landscape&Omnichannel JourneySection 2 Delivery Expectations and the Cost of FrictionSection 3 Evolving consumer behaviour and 15-minute citiesConclusion1.8.16.26.34.ContentsInsights contained in this research include analysis from a nationally representative UK survey(n=2,000)conducted in January 2024.However,despite this digitalisation,physical touchpoints such as stores,delivery lockers,and pick-up-drop-off locations remain integral to the omnichannel journey.These physical touchpoints offer convenience,immediacy,and tactile experiences that complement the digital shopping experience,enriching the overall customer journey and enhancing engagement.When considering the current macroeconomic climate and retail trends,it becomes immediately apparent as to how and why out-of-home delivery is highly popular,necessary,and demand is rising.This research looks at the rise of delivery lockers in a more complex environment(delivery lockers also referred to as parcel-,automated-,or self-service lockers).It explores various issues around online delivery,and consumer sentiments about the current state of play.Our research indicates that over half of consumers have already embraced delivery lockers,particularly appealing to younger,affluent,and frequent online shoppers.This trend highlights the growing demand for hassle-free and efficient delivery solutions that cater to diverse consumer needs.From an economic perspective,the outlook for UK retail remains uncertain.Consumers are grappling with tough economic conditions amidst a cost-of-living crisis which is entering a second phase,where inflation rate hikes have transitioned to elevated interest rates(climbing to over 5%impacting 4.4 million households exiting fixed-rate mortgages)(Source:Bank of England,Retail Economics analysis).This shift has impacted more income brackets,and consumers are still focussed on value and reducing costs.Despite inflation cooling entering 2024,the recovery is being slowed by geopolitical tension and energy price increases,with consumer confidence remaining subdued.Also,pandemic-induced impacts are still being felt.During the pandemic,consumer behaviour and preferences were altered greatly.Online penetration tipped above 30%of total retail sales in 2021(Fig.1),and new cohorts of consumers experienced shopping online for the first time for many products.Interestingly,our research shows that today,at least half of consumers pre-purchase activity is now online;so,although theres been a return to physical stores,consumers are well versed in online shopping processes and tactics.With household budgets squeezed,shoppers want to avoid unnecessary associated costs with online purchases such as delivery and return fees.This poses challenges for retailers already grappling with margin pressures and rising operating costs,prompting a re-evaluation of strategies.From a retail trend perspective,sustainability and the environmental cost of last-mile delivery is a primary concern.Here,delivery lockers present a compelling solution,particularly for high frequency or low value online purchases.With their self-service convenience,parcels can be collected by consumers on routine out-of-home journeys(mutes),eliminating the need for separate deliveries to distributed locations,thus reducing final-mile emissions.The idea of a more centralised delivery point is also aligned to the concept of the 15-minute city(where key services are within a 15-minute walk of homes)or convenience living solutions involving mixed-use complexes.If these town planning concepts are realised in the future,delivery lockers will play an increasing role within these scenarios.The retail landscape is rapidly evolving and delivery lockers are becoming integral to its evolution.This ongoing transition reflects developments in technology,operational capabilities and shifts in consumer behaviour.Consequently,todays customer journeys have become highly complex with online and in-store experiences requiring flexible and adaptable approaches to meet customer needs across various touchpoints and platforms.By integrating digital technologies and enhancing online experiences,retailers aim to provide a seamless and cohesive journey for consumers across all channels.InPostFig.1-Internet sales as%of total retail salesSource:ONS20073.4 10201310.4 1411.3 1512.5 1614.7 1716.3 1818 1919.2 2028.1 129.3 118.3%4.9 0820096.2%7.30.7&.6 21 26.6 222023Page 5IntroductionDELIVERY LOCKERS:UNLOCKING THE FINAL MILEIntroductionTraditionally,consumers think of home delivery when they make an online purchase.However,there are various delivery methods and destinations to consider,including delivery to workplaces or vehicles,click-and-collect options at different locations,and emerging methods like drone and autonomous vehicle deliveries.Within this landscape,mastering final mile delivery at scale becomes very challenging;and factoring for different consumer preferences such as speed,reliability and cost,this challenge becomes even greater.Figure 2 shows automated delivery lockers(ADLs)and the parcel journey,in context of other key delivery options including:InPost Pick-Up Drop-Off points (PUDO)(e.g.in-store or parcelshops)Out of home delivery (e.g.to work or other address)Home deliveryDELIVERY LOCKERS:UNLOCKING THE FINAL MILEIntroductionFig.2:Consumer JourneyAwarenessResearchPurchaseFulfilment Returns Fulfilment PurchaseTotal delivery journeyCourier journeyCustomer collection journeyOnline checkoutIntermediatecollection pointFinal destinationShopping cartShopping cartWarehouseAutomated Delivery Locker(ADL)StoreOut-of-home delivery(Work or other)Home deliveryOut ofhomeHomePage 7Todays consumers demand delivery choices tailored to their preferences and busy lifestyles.From same-day delivery to click-and-collect,retailers must cater to varying needs to remain relevant.Consequently,brands are pivoting towards unified commerce where online,off-line,supply chain insight and a single customer view,operate in concert to deliver seamless and cohesive shopping experiences.By quantifying shoppers delivery preferences,valuable insight can be gained into consumer behaviour and driving motivations,enabling retailers to tailor their delivery strategies effectively to increase conversion and market share.In the UK,the perception that Royal Mail leads the delivery service sector persists,even though other courier networks collectively handle the majority of online shopping deliveries.Yet,as online shopping and its resultant returns have surged over the past decade,delivery lockers have gained prominence.InPost manages a considerable share of these returns,signifying a critical phase within the customer journey where many consumers may first encounter the brand.Advances within the delivery landscape,combined with advances within omnichannel retailing are reshaping many parts of the industry.Consumers are demanding seamless experiences,and delivery expectations have soared to new heights.As such,the stakes are high.Retailers offering inadequate delivery options run the risk of consumers abandoning carts,underlining the importance of flexible delivery solutions for sales growth.InPostFig.3-UK consumers are particularly familiar with Royal Mail and Inpost for sending or returning itemsFig.4 Consumer use of online delivery options SECTION 1For online deliveries,our research reveals that Home delivery remains the dominant choice among consumers(73.5%)(Fig.4).However,a quarter(24.8%)of consumers who use lockers,indicate this method as their most frequent delivery choice,emerging as the second most popular option.Notably,of those who have used delivery lockers,more than half ranked them as either their first or second choice in delivery options,and almost three quarters(71.7%)in their top three.These findings underscore the shifting preferences within the delivery landscape,highlighting a distinct cohort of shoppers that retailers can tap into,explored later in the report.Source:InPost,Retail Economics Source:InPost,Retail Economics The Delivery Landscape&Omnichannel JourneyRoyal MailInPostFedexEVRiUPSYodelDHLDPD89PD8330c%Home(recipients address)Automated delivery lockerClick and collect-RetailerParcel shop counterClick and collect-Other RetailerWord(recipients address)Click and collect-Retailers affiliate73.5$.8 .5%8.2%7.4.5%6.6%Page 9The Delivery Landscape&Omnichannel JourneyThe research revealed that more than half(52.8%)of all consumers have used a delivery locker at least once;this rises to 71%for Gen Z,and 68%for Millennials(Fig.5).One in three consumers used a delivery locker within the last three months of being surveyed(January 2024),rising to two in five consumers who used them in the last six months.InPostFig.6 Nearly 30%of Gen Zs and Millennials rank lockers as their number one choice SECTION 1Fig.5 Locker users tend to be younger more affluent consumers The Delivery Landscape&Omnichannel JourneySource:InPost,Retail Economics Source:InPost,Retail Economics How to read this chart:Each bar represents the proportion of consumers(in that segment)that responded yes to the question-Have you used delivery lockers to send and receive parcels?Example insights:71%of Gen Zs have used delivery lockers to send and receive parcels.44%of consumers earning 30K/year or less have used delivery lockers to send and receive parcels.Consumer ageConsumer incomeShopping frequently onlineGen Z30k30k-50k50k-70k70k-90k90k 68Q5%MillennialsGen XBaby BoomersSilent Generation44qSYrrdXFD2%Once a week or moreOnce a fortnightOnce a month Once every 3 monthsOnce every 6 monthsProportion of consumers who have used delivery lockers to send and receive parcelsProportion of GenZ and Millennial consumers27.9!.2%8.2%9.7%8.4%6.7%#1#2#3#4#5#6#7Page 11Lockers increasingly the choice for Gen Z and MillennialsMore than half of all consumers(52.8%)have used a delivery locker at least once.Our research reveals that locker users are typically younger,more affluent and shop more frequently online(Fig.7).These characteristics are highly attractive for most retail brands.More than seven in ten consumers with incomes of 70,000 per year(or higher)have used delivery lockers at some point,considerably higher than 44%of consumers who have incomes of less than 30,000 per year.In addition,the most frequent online shoppers are more likely to use lockers,with almost two-thirds(64%)of consumers who shop online once per week or more having used them.Even a third of those who shop online just once every six months claimed to have used lockers too,suggesting locker use is widespread,not just digital-first shoppers.Of Gen Zs and Millennials who use delivery lockers amongst other options,27.9%said they used lockers as their most frequent delivery choice(Fig.7).InPostSECTION 1Fig.7 Locker Lovers vs.Home DelivereesThe Delivery Landscape&Omnichannel JourneySource:InPost,Retail Economics Locker LoverAgeGen ZMillennialsBaby Boomers Silent GenerationOnce a week or moreOnce a fortnightOnce a monthOnce every 3 monthsOnce every 6 monthsGen X Weekly WeeklyFortnightlyMonthlyQuarterlyHalf YearlyYearlyInPostSECTION 2When asking consumers about whether lockers or parcel shops were their preferred option(all other factors being equal),our research found that parcel lockers were more favourable(Fig.17).Amongst high frequency online shoppers,three in four Gen Z and Millennials look to use parcel lockers over parcel shops.Interestingly,this proportion is also reflected in online shopping frequency and income.Fig.17 Preference for parcel lockers vs.parcel shopsAs parcel lockers are used for both online deliveries and online returns,its useful for retailers to understand how consumers feel about the relative risk associated with both services.On balance,our research showed that amongst all online shoppers,nearly three in five(58%)feel that using lockers for online returns is riskier than online deliveries.Fig.18 How consumers feel about online returns is influenced by whether they have used parcel lockers beforeDelivery Expectations and the Cost of FrictionSource:InPost,Retail Economics Source:InPost,Retail Economics Page 25GenZ and MillennialsAll online shoppersHave used a delivery lockerHave not used a delivery lockerShop online weekly or moreEarn net 50,000 Prefer delivery lockerOnline deliveries are riskier than online returnsOnline returns are riskier than online deliveriesPrefer delivery shopAs the online ecosystem develops,shifts in online consumer behaviour are likely to be impacted by:(1)the influence of the cost-of-living crisis;(2)the emergence of discount non-food retailers(e.g.Shein and Temu);and(3)increasing concerns over sustainability.While these factors could alter consumer behaviour,we now compare them with an emerging counter-trend the 15-minute city.This city planning concept strives to give people access to key services within a 15-minute walking distance from their homes.If implemented,the 15-minute city idea could have a significant impact on how e-commerce and delivery systems evolve,and give rise to new customer journeys in the future.The cost-of-living impact The cost-of-living crisis continues to be a key influencer of shopper behaviour.Our research reveals that 40%of online shoppers have made an extra effort to shop with retailers who offer free(or cheap)delivery since the crisis began,with higher-income individuals surprisingly leading this trend(Fig.19).However,the current shift away from online shopping isnt solely about delivery costs.In-store promotions and exclusive membership deals are tempting shoppers back to physical stores,where they also prefer the ease of immediate returns and the instant processing of refunds.An increase in cash payments suggests consumers are wanting to use tangible currency to keep better track of spending.These behaviours point to a broader trend where consumers are rediscovering the benefits of in-store shopping,attempting to avoid additional costs linked to online shopping like delayed refunds.The ongoing rise of discount supermarkets like Aldi and Lidl highlight the trend where consumers are willing to compromise on customer service for more attractive prices.Valuing cost savings over experience is akin to the initial stages of online shopping in the late 1990s.Recently,Shein&Temu(two relatively new non-food players operating in the online discount space)have made significant strides.With Shein achieving a turnover exceeding 1bn within just two years,their business model which includes delivery times extending over a week,starkly contrasts with the fast,next-day delivery services offered by many established retailers.As delivery expectations soar,the critical question for these retailers now is whether consumers are willing to accept slower delivery times for the benefit of reduced prices.Our findings indicate that slower delivery times of around 10 days is not a deal breaker for most consumers who shop online(Fig.19).The world of online retail is constantly evolving.The remarkable surge of e-commerce over the last twenty-five years stands as a clear indicator of the value to which consumers place on convenience.Among other benefits,this has accelerated online shopping experiences through innovative functionality,competitive pricing strategies,and diversified delivery options.InPostSECTION 3Fig.19 Higher income consumers now more sensitive to delivery costs Chart shows the proportion of consumers who said that they made an extra effort since the start of the cost-of-living crisis to shop with retailers who offer free or at least cheap delivery.Evolving consumer behaviour and 15-minute citiesSource:InPost,Retail Economics Compromising on delivery speed for pricePage 27Evolving consumer behaviour and 15-minute cities20,000 50,000 80,000 InPost locker usersInPostSECTION 3Fig.20 Two-thirds of consumers do not view 10-day delivery as an online shopping deal-breakerFig.21 Older shoppers are more open to slower deliveries for lower costs than younger generations What this chart shows:Bars represent three consumer groups(split by age,online shopping frequency,and income)who think that a 10-day delivery time would not put them off some online purchases.Interestingly,approximately two-thirds of consumers from each group feel this to be the case.Question:Would you be open to shopping with a retailer with slow delivery times if the cost was acceptable?(yes responses)Younger demographics like Gen Z and Millennials are accepting of longer delivery times for cost savings,with older generations of shoppers being even more accepting(Fig.21).Given these attitudes,its plausible to predict that online discounters will continue to capture more market share in the next three to five years,propelled by their ability to offer cost-effective delivery options as a cornerstone for their growth.Younger demographics like Gen Z and Millennials are accepting of longer delivery times for cost savingsEvolving consumer behaviour and 15-minute citiesSource:InPost,Retail Economics Source:InPost,Retail Economics Page 29Gen ZMillennialsGen XBaby BoomersSilent GenConsumers who shop online once or more a week Gen Z and Millennial consumersConsumers with and annual income of 50K /yearInPostSECTION 3Fig.23 Three-quarters of consumers are engaged and interested in shopping with brands that recycle packaging Evolving consumer behaviour and 15-minute citiesSource:InPost,Retail Economics Source:InPost,Retail Economics Four in five shoppers(84.2%)believe that parcel lockers are more environmentally friendly compared to hand delivery to home or work locations.AgreeDisagreeAll consumersAll consumersGen Z and MillennialsGen Z and MillennialsConsumers who shop online once or more a week Consumers who shop online once or more a week Income of 50k /yearIncome of 50k /yearEngagedInterestedGreen bin recycling will sufficeNot interestedPage 31Parcel lockers present a viable option to help reduce carbon emissions within the ecommerce delivery landscape by leveraging on their centralised locations,which contrasts with the dispersed nature of individual home deliveries.By consolidating shipments and minimizing the need for multiple delivery attempts,a locker can offer an environmentally friendly solution that aligns with the growing consumer demand for sustainable shopping practices.Our research shows that four in five shoppers(84.2%)believe that parcel lockers are more environmentally friendly compared to hand delivery to home or work locations(Fig.22).In addition,consumers who shop frequently online(once a week or more)and earn above 50K /year are more likely to think this.This belief is also linked with age,whereby Gen Z(93.5%)feel that lockers present a greener solution,more than Gen X(81.8%)and the Silent Generation(70.7%).Sustainability concerns with resource use and recycling are strong with many consumers,particularly Gen Z.As a point of interest,we explored consumer senti ments about companies offering to recycle or reuse packaging materials.More than three-quarters of consumers indicated that they are either already active in this area or were interested to know more about shopping with companies who recycle packaging(Fig.23).Our findings show that consumer interest in this area is represented by more affluent Millennial and Gen Z(70.6%)consumers who shop online frequently.SustainabilityFig.22 Consumers overwhelming feel that delivery lockers are better for the environment InPostSECTION 3While it is evident that delivery locker use increases in higher urban density locations,dwelling type is also a significant factor.Practical differences arise between locker users living in houses(where doorstep delivery is more successful),versus people living in flats(where doorstep delivery may be impractical and pose higher risks).From consumers that use lockers,when looking at their first and second choices for delivery options,those living in flats tend to select locker delivery as their first option,whereas those living in houses tend to choose lockers as their second preference(Fig.25).In other words,delivery lockers are of particular relevance in higher density urban environments where office working,and apartment living is more prevalent.This notion aligns with the 15-minute city principle,where more centralised services are embedded into planning schemes.Fig.25 Locker users living in flats(vs.houses)are more likely to choose lockers as their preferred delivery option Fig.24 Locker use by region(note:all regions vs.high urban density locations)While locker use by region does not appear to vary considerably(e.g.Southwest versus West Midlands versus Northeast),London shows the highest overall use,notably higher than the Southeast region.But a distinction between urban and rural locker becomes more evident when analysing location at a postcode level(Fig.24).Evolving consumer behaviour and 15-minute citiesSource:InPost,Retail Economics Page 33The role of efficiency and proximity in true convenienceAmid rising cost-of-living and environmental concerns that influence consumer spending,world leaders recognise that enhancing convenience for a wide array of daily needs is crucial for driving business growth.The 15-minute city concept(where essential services are within a 15-minute walk of homes)embodies principles where centralisation of services could help to reduce energy use and increase convenience in certain areas of day-to-day life.However,our research suggests that convenience isnt solely about instant access to goods and services-its often about the efficiency of the entire shopping journey,including delivery.True convenience encompasses the ability to efficiently complete various tasks,with physical proximity playing a vital role in fulfilling these needs proximity in this context associated with regional town planning schemes and urban housing density.Parcel locker use by UK region and housing typeSource:InPost,Retail Economics AllFlatLocker first choiceLocker second choiceHomeManchesterWolverhamptonBradfordLeedsBirminghamLondon(W postcode)London(NW postcode)With todays elevated customer expectations,retailers can enhance their propositions by offering a comprehensive range of delivery options that address the changing nature of individual preferences and shopper missions.Unnecessary friction caused by insufficient delivery options can lead to online basket abandonment and,in severe cases,consumer boycottshighlighting the need for a robust and flexible delivery system.Consumer behaviour and delivery are impacted by broader societal shifts,such as the cost-of-living crisis,the sustainability movement,and the emerging concept of 15-minute cities.In this regard,delivery lockers have emerged not only as a cost-effective solution but offer the potential to reduce carbon emissions associated with final mile delivery.As we navigate the changing tides of consumer delivery expectations and environmental demands,the role of parcel lockers is set to become increasingly prominent.Their ability to offer a practical solution position them as a keystone in the architecture of the future delivery landscape.Retailers have the opportunity to capitalise on these trends,continue to innovate,and adapt to changing preferences,ensuring that the convenience of the ecommerce experience is matched by the efficiency and sustainability of delivery.InPost is Europes leading delivery platform for eCommerce.Founded by Rafa Brzoska,the first Parcel Locker appeared in Krakw in 2009 and quickly became an indispensable part of online shopping,delivering guaranteed speed and convenience.Today,the InPost network is Europes largest and most convenient automated parcel collection and delivery system,with over 35,000 modern APMs and over 30,000 PUDO points in 9 countries(UK,France,Poland,Italy,Spain,Portugal,Belgium,Luxembourg,the Netherlands).Retail Economics is an independent economics research consultancy focused on the consumer and retail industry.We analyse the complex retail economic landscape and draw out actionable insight for our clients.Leveraging our own proprietary retail data and applying rigorous economic analysis,we transform information into points of action.Our service provides unbiased research and analysis on the key economic and social drivers behind the retail sector,helping to inform critical business decisions,giving you a competitive edge through deeper insights.Richard Lim(CEO,Retail Economics)Stuart Parkinson(Chief Economist,Retail Economics)In the dynamic world of retail,the integration of parcel lockers within the omnichannel journey represents a significant evolution in delivery preferences.Although home delivery remains the predominant delivery option,over half of consumers have now experienced the convenience of delivery lockers.And significant adoption has been observed by wealthier Gen Z and Millennial shoppers who shop more frequently online.This shift marks a growing contrast between locker use and home delivery,with motivations for locker use hinging on factors such as convenience,speed,cost,and the appeal of their centralised network to address sustainability concerns.InPostConclusionPage 35ConclusionAbout InPostAbout Retail EconomicsContributorsDELIVERY LOCKERS:UNLOCKING THE FINAL MILEFollow us on LinkedIninpost.co.uk/business/retail-solutionswith Retail Economics Thought Leadership What is thought leadership?The process of positioning your brand as an industry expert with the goal of providing valuable insights to guide,influence and inspire your sectors growth.Why consider it?Publishing thought leadership research is a proven content marketing strategy to help you get media exposure to supercharge your brand equity and win new business.In a nutshellWe produce thought leadership research(white papers)that gets media exposure.This boosts your brand awareness and positions you as an authority to help fuel your sales pipeline.Generate original industry insights to supercharge your marketing strategy&engagementSupercharge your marketing&brand awarenessBecome an authority in your field and be seen as a trusted source of insightBe seen as a thought leaderWell help you get media exposure and support you with your campaign launchGet media coverage&campaign supportBecome a thought leader in your industry to help generate new businessWin new business!Case studyResearch ideasYoull get a choice of headline-grabbing research ideas that well sell into the media early in the process.Industry reportClient:Grant ThorntonChallenge:Achieve widespread media exposure for their brand,demonstrating its authoritative understanding on consumer behaviour,positioning it to current&potential clients to win new business.Solution:Publish engaging research with valuable industry insights&provide launch campaign support with press releases&social content.Media coverage:33 pieces:10 nationals,9 regional,14 consumer&tradeMarketing collateralYou can get engaging digital marketing content to supercharge your launch campaign:video,social posts&infographics.Media exposureYou get access to our powerful network of media&industry contacts,plus engaging press releases&social media collateral to maximise your impact.Sales leadsGet noticed by your target audience!Engage new and existing clients with increased brand equity&authority.What you get:Our 5-step processWell do the heavy lifting:design&conduct the research,do the analysis&produce an insightful report.Why consider us?We produce hard-hitting researchWe can get you in the mediaWe help you get quality sales leads Our track record speaks for itself 44(0)20 3633 3698www.retaileconomics.co.ukinforetaileconomics.co.ukGet in touchJust some of our projectsOutlook for UK Retail&ConsumerThe Connected Customer JourneyEconomic ConsultancyRetail Experience EconomyChanging Consumer Values-Head of Retail&Leisure“Retail Economics provides insightful and thought-provoking analysis.-Insight Director“They provide us with the latest data enabling us to understand whats impacting customer behaviour.-Head of Retail&Leisure“Retail Economics contextualise the volatile economic environment adding significant value to our business.FIND OUT MORE
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Quarterly Air Transport Chartbook IATA Sustainability and Economics Q2 2024 2 Quarterly Air Transport Chartbook-Q2 2024 Table of contents Table of contents.2 Glossary.3 Route areas abbreviations.4 Table of charts.5 1.The business cycles.8 2.Aviation fuel.10 2.1.Conventional aviation fuel.10 2.2.Sustainable aviation fuel.10 3.Passenger and cargo traffic.12 3.1.Passenger traffic.12 3.2.Air connectivity.14 3.3.Cargo traffic.16 4.Regional performance.18 4.1.Africa.18 4.2.Americas.20 4.3.Asia Pacific.22 4.4.Europe.24 4.5.Middle East.26 3 Quarterly Air Transport Chartbook-Q2 2024 Glossary ACTK Available Cargo Tonne-Kilometers ASKs Available Seat-Kilometers ATJ Alcohol-to-Jet ATKs Available Tonne-Kilometers BBL Barrel BLF Breakeven Load Factor CLF Cargo Load Factor CORSIA carbon offsetting and reduction scheme for international aviation CTK Cargo Tonne-Kilometers EBIT Earnings before interest and taxes FT Fischer-Tropsch GDP Gross Domestic Product HEFA-Hydro-processed Esters and Fatty Acids LF Load Factor MoM Month-on-month MoUs Memoranda of understanding OPEC Organization of the Petroleum Exporting Countries O-D Origin-Destination PLF Passenger Load Factor PMI Purchasing Managers Index PtL Power-to-Liquid PPP Purchasing power parity RPK Revenue Passenger-Kilometers RTK Revenue Tonne-Kilometers SA Seasonally adjusted SAF Sustainable Aviation Fuel QoQ Quarter-on-quarter USD United States Dollar YoY Year-on-year 4 Quarterly Air Transport Chartbook-Q2 2024 Route areas abbreviations AE Africa-Europe AF Africa-Far East AM Africa-Middle East CS Central America/Caribbean-South America EC Europe-Central America/Caribbean EF Europe-Far East EM Europe-Middle East EN Europe-North America ES Europe-South America FN Far East-North America FP Far East-Southwest Pacific MF Middle East-Far East MN Middle East-North America NC North America-Central America/Caribbean NS North America-South America PS North/South America-Southwest Pacific WC Within Central America WE Within Europe WF With Far East WS Within South America Notes:North America:Bermuda,Canada,St.Pierre and Miquelon,United States including Alaska and Hawaii,but excluding Puerto Rico and United States Virgin Islands Central America/Caribbean:Anguilla,Antigua and Barbuda,Aruba,Bahamas,Barbados,Belize,British Virgin Islands,Cayman Islands,Costa Rica,Cuba,Dominica,Dominican Republic,El Salvador,Granada,Guadeloupe,Guatemala,Haiti,Honduras,Jamaica,Martinique,Mexico,Monserrat,Netherlands Antilles,Nicaragua,Panama,Puerto Rico,St.Kitts-Nevis,Saint Lucia,Saint Vincent and the Grenadines,Trinidad&Tobago,Turks and Caicos Islands,United States Virgin Islands South America:Argentina,Bolivia,Brazil,Chile,Colombia,Ecuador,French Guiana,Guyana,Paraguay,Peru,Suriname,Uruguay,Venezuela Europe:Albania,Andorra,Armenia,Austria,Azerbaijan,Belarus,Belgium,Bosnia Herzegovina,Bulgaria,Croatia,Cyprus,Czech Republic,Denmark,Estonia,Faeroe Islands,Finland,France,Georgia,Germany,Greece,Greenland,Hungary,Iceland,Ireland(Republic of),Italy,Latvia,Liechtenstein,Lithuania,Luxembourg,Macedonia(former Republic of Yugoslavia),Malta,Moldova,Monaco,Netherlands,Norway,Poland,Portugal,Romania,Russian Federation,San Marino,Serbia and Montenegro,Slovakia,Slovenia,Spain,Sweden,Switzerland,Turkey,Ukraine,United Kingdom Middle East:Bahrain,Iran,Iraq,Israel,Jordan,Kuwait,Lebanon,Oman,Qatar,Saudi Arabia,Syrian Arab Republic,United Arab Emirates,Yemen Northern Africa:Algeria,Egypt,Libya,Morocco,Sudan,Tunisia Southern Africa:Angola,Benin,Botswana,Burkina Faso,Burundi,Cameroon,Cape Verde,Central African Republic,Chad,Comoros,Congo,Cote dIvoire,Democratic Republic of the Congo,Djibouti,Eritrea,Equatorial Guinea,Ethiopia,Gabon,Gambia,Ghana,Guinea,Guinea-Bissau,Kenya,Lesotho,Liberia,Madagascar,Malawi,Mali,Mauritania,Mauritius,Mayotte,Mozambique,Namibia,Niger,Nigeria,Reunion,Rwanda,Sao Tome&Principe,Senegal,Seychelles,Sierra Leone,Somalia,South Africa,South Sudan,Swaziland,Tanzania,Togo,Uganda,Zambia,Zimbabwe Far East:Afghanistan,Bangladesh,Bhutan,Brunei Darussalam,Cambodia,Peoples Republic of China,Hong Kong(SAR,China),India,Indonesia,Japan,Kazakhstan,Korea(Democratic Peoples Republic of),Korea(Republic of),Kyrgyzstan,Lao Peoples Democratic Republic,Macao(SAR,China),Malaysia,Maldives,Mongolia,Myanmar,Nepal,Pakistan,Philippines,Singapore,Sri Lanka,Chinese Taipei,Tajikistan,Thailand,Timor Leste,Turkmenistan,Uzbekistan,Vietnam Southwest Pacific:American Samoa,Australia,Cook Islands,Fiji,French Polynesia,Guam,Kiribati,Marshall Islands,Micronesia,Nauru,New Caledonia,New Zealand,Niue,Northern Mariana Islands,Palau,Papua New Guinea,Samoa,Solomon Islands,Tonga,Tuvalu,United States Minor Outlying Islands,Vanuatu,Wallis&Futuna Islands 5 Quarterly Air Transport Chartbook-Q2 2024 Table of charts Chart 1:Nasdaq index(right)and 10-year treasury yield(left).9 Chart 2:US nonfarm payroll monthly gains,thousand persons.9 Chart 3:Consumer price inflation in major economies,%YoY.9 Chart 4:Real GDP growth rate in major economies,%YoY.9 Chart 5:Unemployment rate in major economies,%.9 Chart 6:Global GDP(right)and RPK(left),%YoY.9 Chart 7:Crude oil(Brent),jet fuel,and crack spread,USD/barrel.11 Chart 8:Jet fuel crack spread(global jet fuel price less dated brent),USD/barrel.11 Chart 9:Quarterly jet fuel regional difference(Regional price global average jet fuel price),USD per barrel.11 Chart 10:Number of SAF offtake agreements,as of June 2024.11 Chart 11:Cumulative renewable fuel capacity,million tons.11 Chart 12:Total renewable fuel production by technology by 2030,%of total capacity.11 Chart 13:Industry total RPK,billion.13 Chart 14:Regional contribution to industry annual RPK growth.13 Chart 15:Total RPK by airline region of registration,%YoY.13 Chart 16:Passenger Load Factor by airline region of registration,%share of ASK.13 Chart 17:Domestic RPK by country market,%YoY.13 Chart 18:International RPK by airline region of registration,%YoY.13 Chart 19:IATA Global Air Connectivity Index,2014=100.15 Chart 20:Global airport pairs,thousand.15 Chart 21:IATA Domestic Air Connectivity Index,selected countries,2014=100.15 Chart 22:IATA Interregional Air Connectivity Index,2014=100.15 Chart 23:IATA Intraregional Air Connectivity Index,2014=100.15 Chart 24:Industry CTK,billion.17 Chart 25:Industry CTK,year-to-date,billion.17 Chart 26:International CTK by airline region of registration,%YoY.17 Chart 27:Industry ACTK,billion.17 6 Quarterly Air Transport Chartbook-Q2 2024 Chart 28:Global air cargo yield(with surcharges),USD/kg(LHS),and industry cargo load factor,seasonally adjusted,%(RHS).17 Chart 29:International cargo load factor by major route area,share of ACTK,%.17 Chart 30:Africa,international air passenger traffic by route area,%YoY.19 Chart 31:Africa,air passenger load factor by route area,share of ASK,%.19 Chart 32:Africa,international air cargo traffic by route area,%YoY.19 Chart 33:Traffic between Africa and its top 10 destinations,%YoY.19 Chart 34:Africa,Q3 travels purchased during Q2 by market of destination,%YoY.19 Chart 35:Africa,aircraft deliveries,2015-2023(delivered),2024-2025(scheduled).19 Chart 36:Americas,international air passenger traffic growth by route area,%YoY.21 Chart 37:Americas,international air cargo traffic by route area,%YoY.21 Chart 38:Traffic between North America and its top 10 destinations,%YoY.21 Chart 39:Traffic between Latin America and its top 10 destinations,%YoY.21 Chart 40:Americas,Q3 travels purchased during Q2 by market of destination,%YoY.21 Chart 41:Americas,aircraft deliveries,2015-2023(delivered),2024-2025(scheduled).21 Chart 42:Asia Pacific,international air passenger traffic by route area,%YoY.23 Chart 43:Asia Pacific,international air cargo traffic by route area,%YoY.23 Chart 44:Traffic between Asia Pacific and its top 10 destinations,%YoY.23 Chart 45:China,air passengers to and from other regions,Q2 each year,index.23 Chart 46:Asia Pacific,Q3 travels purchased during Q2 by market of destination,%YoY.23 Chart 47:Asia Pacific,aircraft deliveries,2015-2023(delivered),2024-2025(scheduled).23 Chart 48:Europe,international air passenger traffic by route area,%YoY.25 Chart 49:Europe,air passenger load factor by route area,share of ASK,%.25 Chart 50:Europe,international air cargo traffic by route area,%YoY.25 Chart 51:Traffic between Europe and its top 10 destinations,%YoY.25 Chart 52:Europe,Q3 travels purchased during Q2 by market of destination,%YoY.25 Chart 53:Europe,aircraft deliveries,2015-2023(delivered),2024-2025(scheduled).25 Chart 54:Middle East,international air passenger traffic by route area,%YoY.27 Chart 55:Middle East,air passenger load factor by route area,share of ASK,%.27 7 Quarterly Air Transport Chartbook-Q2 2024 Chart 56:Middle East,international air cargo traffic by route area,%YoY.27 Chart 57:Traffic between the Middle East and its top 10 destinations,%YoY.27 Chart 58:Middle East,Q3 travels purchased during Q2 by market of destination,%YoY.27 Chart 59:Middle East,aircraft deliveries,2015-2023(delivered),2024-2025(scheduled).27 8 Quarterly Air Transport Chartbook-Q2 2024 1.The business cycle The US economy continues to surprise on the upside for the most part,though stock markets took fright and ended sharply lower on Monday 5 August(Chart 1).GDP grew by 2.8%in the second quarter(Q2)annualized,or 0.7%quarter-on-quarter(QoQ),and the economy gained 3%compared to Q2 2023.This was above consensus expectations for the quarter.However,the July increase in non-farm payrolls disappointed with a monthly gain of 114,000-well below the average monthly gain over the past 12 months of 215,000(Chart 2).The unemployment rate ticked up to 4.3%.While job creation above 100,000 per month tends to be associated with a robust economy,the momentum is clearly slowing in the jobs market.A main source of growth in the Q2 GDP number was inventory build-up which also hints at slower growth ahead.This has caused the Federal Reserve(Fed)to switch its focus from combating inflation to supporting the labor market(the Fed has a dual mandate to ensure price stability and maximize employment),as clearly articulated by Fed Chair Jerome Powell on 23 August.The fact that July consumer price inflation dipped below 3%,to 2.9%year-on-year(YoY),for the first time in three years,certainly justifies the greater focus on the jobs market,and a rate cut at the next meeting on 17-18 September is now virtually guaranteed(Chart 3).Nevertheless,core inflation(excluding food and energy)is still at 3.2%YoY,and services price inflation at 4.9%YoY,arguing for a 25 basis point cut rather than a bigger move.Chinas Q2 GDP grew by 4.7%YoY and by 0.7%QoQ,and this was below expectations(Chart 4).The government is aiming for GDP growth of around 5%YoY in 2024.The impact of the downturn in the property market,mounting local government debt,and weak private-sector spending is weighing on the business cycle.The lack of buoyancy in the Chinese economy is also apparent in consumer price inflation,which rose a mere 0.2%YoY in June.This is an improvement on the negative inflation rate recorded into January of this year but strongly suggests that additional stimulus measures from the government side are warranted.Indeed,a raft of new measures were announced at the beginning of August,focused on the service sector and notably on care for the elderly and on potentially extending visa-free travel policies to more countries.Tourists are also going to be able to benefit from“low-altitude aviation”,including airships and parachuting,as part of the new measures.Europe is bringing little fizz to the global business cycle,expanding 0.6%in the euro area and 0.7%in the EU YoY in the second quarter.The QoQ growth rate was 0.3%for both areas.The July inflation rate stood at 2.6%YoY,up a smidge from June,and unsurprisingly the European Central Bank left its policy rates unchanged at the July meeting.The most positive aspect of the European economy currently is arguably the still historically low unemployment rate of 6%in June(and 6.5%in the euro area)(Chart 5).This rather lackluster state of affairs in the global economys principal growth engines begs the question of where some light relief might come from,and we look to India to answer that question.In the fiscal year 2023-2024(ending March),Indias GDP grew by 8.2%YoY.In Q4 of the fiscal year,GDP expanded by 7.8%YoY.The June inflation rate rose to 5.1%from 4.8%in May but is nevertheless down from 7.4%in July 2023.Unemployment is a concern in India,estimated by CMIE(Centre for Monitoring Indian Economy)at 9.2%in June,up from 7%in May.Projections from the finance ministrys economic division calculate that the Indian economy needs to generate an average of nearly 7.85 million jobs annually until 2030 in the non-farm sector to cater for the rising workforce.Clearly,Indias buoyant economic growth is insufficiently job rich.The“steady-as-she-goes”global economy(Chart 6)masks growing trouble in poor countries.Low-income country debt repayments due to foreign creditors are now three times as high as the long-term average.As many as 60 countries are considered in moderate to outright debt distress by the IMF as of April 2024.There is limited immediate risk of a systemic financial crisis,but insufficient growth,high debt burdens,and the high interest environment are all taking an increasing toll.9 Quarterly Air Transport Chartbook-Q2 2024 Chart 1:Nasdaq index(right)and 10-year treasury yield(left)Source:MacroBond Chart 2:US nonfarm payroll monthly gains,thousand persons Source:MacroBond Chart 3:Consumer price inflation in major economies,%YoY Source:MacroBond Chart 4:Real GDP growth rate in major economies,%YoY Source:IMF World Economic Outlook Chart 5:Unemployment rate in major economies,%Source:MacroBond Chart 6:Global GDP(right)and RPK(left),%YoY Source:IATA Sustainability and Economics,and IMF World Economic Outlook -4-202468101214161820102012201420162018202020222024ChinaEuro AreaIndiaJapanUnited States%-8-6-4-202468-80-60-40-200204060801980198519901995200020052010201520202025Global RPK(LHS)Global GDP(RHS) Quarterly Air Transport Chartbook-Q2 2024 2.Aviation fuel 2.1.Conventional aviation fuel Global jet fuel prices hovered around USD 100 per barrel in Q2,supported by steady seasonal air travel demand(Chart 7).Geopolitical tensions around the Russia-Ukraine war and that in the Middle East continue to put a floor under both crude and jet fuel prices.The jet fuel crack spread(i.e.the premium over Brent crude)has moderated but fails to revert to USD 0 20 per barrel range in what looks like a structural shift up(Chart 8).Faced with decarbonization pressures and a bearish ground transportation fuel demand outlook,less efficient refineries are shutting down or converting to other facilities,such as chemical plants.The effects of such past and ongoing regional refinery rationalizations in Europe and in the US are one factor that contributes to the amplified jet fuel price imbalances among regions(Chart 9).The gap between the lowest and the highest regions is still wider than prior to the pandemic.The difference in regional jet fuel prices between the Middle East and Latin America was USD 10 per barrel in Q2,compared to USD 5 per barrel in 2019.2.2.Sustainable aviation fuel Over the past two years,the aviation industry has signed 88 Sustainable Aviation Fuel(SAF)offtake agreements,including aircraft manufacturers and airlines(Chart 10).Of these,65 are binding purchase agreements,and 23 are non-binding.As of June 2024,67 airlines worldwide had publicly announced their SAF purchase agreements.With the agreements added in the second quarter of 2024,75 of the total number of purchase agreements are based on bio-SAFs from four primary pathways,the majority of which are Hydro-processed Esters and Fatty Acids(HEFA)and HEFA Co-Processing.E-fuel SAFs from various Power-to-Liquid(PtL)projects comprise the remaining 13 agreements.We are tracking global SAF facilities that have been announced and are at different stages of development worldwide.From publicly announced renewable fuel projects until 2030,around 140 identified projects are progressing in 31 countries with cumulative renewable fuel capacity(Chart 11)at 51 Mt.The advancement of these projects,in terms of their scale-up status,have not yet progressed as expected due to various reasons,such as lack of feedstock,lack of financing,poor project economics,etc.SAF is of critical importance in the decarbonizing efforts of the aviation industry.How much of the worlds total renewable energy production will be in the form of SAF will depend on the production pathway and the operators optimization of the product mix at refineries.While technologies can enable the adjustment of product slates(as seen in the case of renewable diesel and SAF),this flexibility often comes at the expense of overall yields.Government policies should encourage SAF production relative to renewable diesel while promoting diversification of feedstock and technologies that maximize the SAF production potential at bio-refineries.IATA forecasts that over 85%of total global renewable fuel capacity out to 2030 would be based on the HEFA pathway,whereas now this is limited to around 78%(Chart 12).Despite SAF diversification exemplified through more individual plants across multiple technologies,especially in the EU,the key will be to scale these demo facilities to commercial operations,which is crucial to diversifying the SAF pathways.11 Quarterly Air Transport Chartbook-Q2 2024 Chart 7:Crude oil(Brent),jet fuel,and crack spread,USD/barrel Source:S&P Global Commodity Insight Chart 8:Jet fuel crack spread(global jet fuel price less dated brent),USD/barrel Source:IATA Sustainability and Economics,S&P Global Commodity Insights Chart 9:Quarterly jet fuel regional difference(Regional price global average jet fuel price),USD per barrel Source:IATA Sustainability and Economics,S&P Global Commodity Insights Chart 10:Number of SAF offtake agreements,as of June 2024 Source:IATA Sustainability and Economics Chart 11:Cumulative renewable fuel capacity,million tons Source:IATA Sustainability and Economics Chart 12:Total renewable fuel production by technology by 2030,%of total capacity Source:IATA Sustainability and Economics 020406080100120140160180201920202021202220232024USD/bblCrackDated BrentJet fuel price0204060JanFebMarAprMayJunJulAugSepOctNovDecUSD/bbl3-yr range(2017-2019)20232024-8-40420192023 Q32023 Q42024 Q12024 Q2USD/bblAsia&OceaniaEurope&CISMidEast&AfricaNorth Ame.Latin Ame.&Caribbean0102030405060708090100012345678910Jan Mar MayJulSep Nov Jan Mar MayJulSep Nov Jan Mar May202220232024Cumulative no.of agrementsNo.of agreementsNumber of agreements of the monthCumulative number of agreements(RHS)01020304050602021202220232024202520262027202820292030MtAtJ7.1%Co-Process9.5%HEFA78.2%Others0.3%PtL1.3%Syngas FT3.6 Quarterly Air Transport Chartbook-Q2 2024 3.Passenger and cargo traffic 3.1.Passenger traffic The steady rise in air passenger traffic continued in Q2 of 2024 amid a broadly stable macro-economic environment.Unemployment rates are increasing in certain countries but are still exceptionally low,mitigating the impact of inflation and supporting air travel demand as the peak travel period starts.Revenue Passenger-Kilometers(RPK)increased by 1.7%in seasonally adjusted terms QoQ,and by an impressive 10.1%YoY this quarter.Traffic continues to climb above the historical peak of 2019,but growth momentum has stabilized(Chart 13).The total industrys traffic growth is underpinned by a strong rebound in the Asia Pacific region,although this has decelerated slightly(Chart 14).Despite the high base resulting from last years surge,the region reported a robust 14.8%increase in RPK YoY,just shy of the leading African carriers at 14.9%.These figures reflect a sustained,healthy demand for air travel,with all regions worldwide contributing to this positive trend(Chart 15).The Passenger Load Factor(PLF)is a strong indicator of passenger demand.In Q2 2024,industry wide PLF reached 83.5%,the highest on record for that quarter,and 0.5 percentage points and 0.9 percentage points higher than the same quarter in 2019 and 2023,respectively.The only region that saw a decrease in the load factor was North America,while the other regions have all achieved record Q2 levels(Chart 16).Domestic passenger traffic growth is now aligned with historical averages.The industry-wide increase in domestic RPK was 4.2%YoY this quarter,a significant deceleration from the 11.1%observed in Q1(Chart 17).The large drop reflects a stabilization in PR China,where pent-up demand had pushed numbers out of seasonal norms and to record levels over the past year.RPK were 5.8%higher in this key market in Q2,YoY.India,a rapidly developing market,saw domestic traffic grow by 4.0%YoY in Q2,a steady rate that aligns with past observations.In the US,passenger traffic rose 4.2%on the same basis and absolute levels surpass the pre-pandemic benchmark.On the other hand,in Japan,RPK contracted by 1.4%YoY this quarter,mirroring falling domestic consumption,and the cost impact of the weaker Japanese yen.In Australia and Brazil domestic traffic gained 2.1%and 4.9%YoY in Q2,respectively.International traffic is still the main driving force behind the increase in global passenger numbers.In this market segment,RPK expanded by a robust 14.0%YoY in the second quarter,with nearly all regions recording double-digit increases(Chart 18).The Asia Pacific region is at the forefront of this growth,boasting a 26.8%YoY rise in international passenger traffic.Despite having the advantage of rising from a lower base in 2023 compared to other regions,Asia Pacifics stunning recovery is noteworthy and has extended into the current quarter.Africa also performed strongly,gaining 15.0%YoY in Q2.North American carriers,while recording the smallest increase among the regions at 6.9%YoY,benefit from high absolute levels that surpass those seen in 2019.13 Quarterly Air Transport Chartbook-Q2 2024 Chart 13:Industry total RPK,billion Source:IATA Sustainability and Economics,IATA Monthly Statistics Chart 14:Regional contribution to industry annual RPK growth Source:IATA Sustainability and Economics,IATA Monthly Statistics Chart 15:Total RPK by airline region of registration,%YoY Source:IATA Sustainability and Economics,IATA Monthly Statistics Chart 16:Passenger Load Factor by airline region of registration,%share of ASK Source:IATA Sustainability and Economics,IATA Monthly Statistics Chart 17:Domestic RPK by country market,%YoY Source:IATA Sustainability and Economics,IATA Monthly Statistics Chart 18:International RPK by airline region of registration,%YoY Source:IATA Sustainability and Economics,IATA Monthly Statistics 05001,0001,5002,0002,500Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q22019202020212022202324ActualSeasonally AdjustedRPK,billion02040Q2Q1Q4Q3Q2242023AfricaAsia PacificEuropeLatin AmericaMiddle EastNorth AmericaIndustry YoY040IndustryAfricaEuropeMiddle EastNorthAmericaAsia PacificLatinAmerica&CaribbeanQ1-2024Q2-2024657075808590IndustryAfricaAsia/PacificEuropeLatin America andCaribbeanMiddle EastNorth AmericaQ2-2024Q2-2023%-5051015202530IndustryAustraliaBrazilIndiaJapanUnitedStatesPR ChinaQ1-2024Q2-202404060IndustryAfricaEuropeMiddle EastNorthAmericaAsia PacificLatinAmerica&CaribbeanQ1-2024Q2-2024 Quarterly Air Transport Chartbook-Q2 2024 3.2.Air connectivity IATAs Air Connectivity Index measures how well countries worldwide are interconnected via air transportation.The index reflects the seat capacity of direct flights to each destination at the airport level,weighted by the destinations size(measured by seat capacity handled).Continuing the upward trend,on a global level,domestic air connectivity grew by 6.8%YoY in Q2,while international air connectivity increased by 22.1%YoY(Chart 19).The global number of airports connected by direct flights has increased to 24,400 airport pairs,a moderate 3.3%YoY increase.This increase is mainly due to a 6.7%YoY growth in international airport pairs.Domestic airport pairs have remained relatively stagnant,rising only by 0.2%YoY(Chart 20).Looking closer at domestic air connectivity across a selection of countries,we observe significant differences in YoY growth(Chart 21).Most notably,domestic air connectivity grew strongly in China and India by 14.6%and 9.9%YoY,respectively.In Australia,the United States,and Japan,more moderate increases of 6.2%,5.0%,and 3.2%YoY,in that order,took place.Brazils domestic air connectivity,on the other hand,decreased by 7.9%YoY.Analyzing flights connecting different regions,we see that interregional connectivity has grown as a whole and in every region(Chart 22).Asia Pacific benefitted from the greatest improvement in interregional connectivity,up by 25.5%YoY.This was followed by North America and Europe at 18.2%,and 16.7%YoY,respectively.The latter regions strong growth can be explained by their greater connectivity with the Asia Pacific region.These regions were followed by the regions of Africa,Latin America&the Caribbean,and the Middle East,all of which showed strong numbers as well,at 13.1%,10.6%,and 8.0%YoY,respectively.Considering international flights within the same region,intraregional air connectivity too has grown more buoyant(Chart 23).With travel growing strongly to and from China,intraregional connectivity in the Asia Pacific increased by an eyewatering 62.1%YoY in the second quarter.Furthermore,Latin America and the Caribbean,as well as the Middle East both expanded their intraregional connectivity by an impressive 24.8%and 16.6%YoY,respectively.More moderate but still significant gains in intraregional connectivity were observed in Europe,Africa,and North America,which regions improved by 13.0%,11.7%,and 7.0%YoY,respectively.15 Quarterly Air Transport Chartbook-Q2 2024 Chart 19:IATA Global Air Connectivity Index,2014=100 Source:IATA Sustainability and Economics Chart 20:Global airport pairs,thousand Source:IATA Sustainability and Economics Chart 21:IATA Domestic Air Connectivity Index,selected countries,2014=100 Source:IATA Sustainability and Economics Chart 22:IATA Interregional Air Connectivity Index,2014=100 Source:IATA Sustainability and Economics Chart 23:IATA Intraregional Air Connectivity Index,2014=100 Source:IATA Sustainability and Economics 050100150200250300Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 120152016201720182019202020212022202324DomesticInternationalIndex02468101214Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 120152016201720182019202020212022202324DomesticInternationalThousand050100150200250300Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 214 20152016201720182019202020212022202324AustraliaBrazilChinaIndiaJapanUnited StatesIndex,2014=1000510152025Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 1Qtr 3Qtr 120152016201720182019202020212022202324AfricaAsia PacificEuropeLatin America&CaribbeanMiddle EastNorth AmericaIndex020406080100120140160180Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 2Qtr 4Qtr 214 20152016201720182019202020212022202324AfricaAsia PacificEuropeLatin America&CaribbeanMiddle EastNorth AmericaIndex 16 Quarterly Air Transport Chartbook-Q2 2024 3.3.Cargo traffic The airline industry recorded a strong 13.5%annual increase in cargo tonne-kilometers(CTK)in Q2 2024(Chart 24).Air cargo volumes rose 2.7%compared to Q1 and after seasonal adjustment.As a result,Q2 2024 was the fourth consecutive quarter with positive YoY growth and the second straight quarter with a double-digit annual surge.In addition,Q1 contributed to an exceptional first half-year performance for air cargo,with volumes exceeding 2023,2022,and even the record-breaking 2021 levels(Chart 25).These extraordinary traffic levels have appeared amid escalating trade tensions and heightened policy uncertainty.They can be partly explained by booming e-commerce out of Asia and repeated disruptions in global maritime shipping,which have led to a strategic diversification of certain supply chains.Most air cargo is carried across borders.In Q2,demand on the international routes expanded by 14.4%YoY.All world regions supported this double-digit growth,thanks in part to the low base in the first half of 2023(Chart 26).Notably,airlines registered in Asia Pacific expanded air cargo volumes by an impressive 16.7%YoY,the largest increase since 2021.These carriers accounted for 40%of the global expansion in Q2,thanks to their large market size.European cargo volumes followed closely with 16.0%YoY,while African and Middle Eastern airlines registered 14.5%and 13.2%,respectively.For the Middle East,the second quarter result reflects a notable 9.8 percentage points drop compared to the growth recorded in Q1,though this is related to a strong base effect(caused by a buoyant second quarter in 2023).Finally,airlines registered in the Americas joined other regions with double-digit increases,marking 11.6%annual growth in Latin America and 10.0%in North America.On the supply side,industry-wide available cargo tonne-kilometers(ACTK)registered a 7.6%growth YoY in Q2 2024,curtailing the momentum of the previous four straight quarters with double-digit expansions(Chart 27).Despite this slight deceleration in the growth rate,global air cargo capacity has reached record levels year-to-date,maintaining the steady upward trajectory that started after the pandemic.With an annual increase of 16.3%YoY,passenger belly-hold capacity continues to be the primary driver of industry-wide growth,while dedicated freighter capacity grew by a mere 3.8%.As a result,belly capacity now takes up as much as 55%of international ACTK,thereby continuing to approach the pre-pandemic share of about 60%.However,it is notable that the contribution of belly capacity to the international ACTK expansion has declined since Q1 2023.In Q2 2024,the seasonally adjusted industry cargo load factor(CLF)remained roughly level compared to Q1,reporting 46%on average(Chart 28).This is 2.2 percentage points above the corresponding 2023 value and reflects the second consecutive month with positive annual growth in the global CLF after a long streak of negative YoY evolutions that started in Q3 2021.Strong global demand growth has helped load factors recover from the post-pandemic influx of international belly capacity.However,there is still some distance to cover before reaching the pre-pandemic average of 49%(2010-2019).Meanwhile,the global air cargo yield(with surcharges)showed an uptick of 6.1%QoQ and a minor reduction of 0.8%YoY,the smallest annual drop since Q4 2022.Importantly,recurring disruptions in maritime shipping and the related sharp decline in relative air freight rates over maritime continue to ensure that air services remain significantly more competitive than pre-pandemic.On international routes,the average CLF declined from 51.7%in Q1 to 50.5%in Q2.As has been the case since Q3 2022,the highest load factors were observed on the Asia-Europe and Asia-North America trade lanes,with 68.5%and 63.8%,respectively(Chart 29).Measured in CTK,these two routes handle the largest air cargo volumes worldwide,and after the pandemic,they started benefiting from thriving e-commerce demand.By contrast,the Transatlantic routes the third largest in the world registered a significant 9.2 percentage points decline in load factors in Q2,closing with a comparatively low 40.2%.This is typical for the second quarter,as the Europe-North America trade lane is guided by retail cycles that tend to peak during the winter season.17 Quarterly Air Transport Chartbook-Q2 2024 Chart 24:Industry CTK,billion Source:IATA Sustainability and Economics,IATA Monthly Statistics Chart 25:Industry CTK,year-to-date,billion Source:IATA Sustainability and Economics,IATA Monthly Statistics Chart 26:International CTK by airline region of registration,%YoY Source:IATA Sustainability and Economics,IATA Monthly Statistics Chart 27:Industry ACTK,billion Source:IATA Sustainability and Economics,IATA Monthly Statistics Chart 28:Global air cargo yield(with surcharges),USD/kg(LHS),and industry cargo load factor,seasonally adjusted,%(RHS)Source:IATA Sustainability and Economics,IATA Monthly Statistics,CargoIS Chart 29:International cargo load factor by major route area,share of ACTK,%Source:IATA Sustainability and Economics,IATA Monthly Statistics 404550556065707580Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q220172018201920202021202220232024BillionActualSeasonally adjusted050100150200250300Q1Q2Q3Q4Billion2022202320240%5 %IndustryAsia PacificEuropeAfricaMiddle EastLatinAmericaNorthAmericaQ1 2024Q2 202490100110120130140150160Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q220172018201920202021202220232024Billion ActualSeasonally adjusted40BDFHPRTVX%0.00.51.01.52.02.53.03.54.04.55.0Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2201920202021202220232024Air cargo yield(LHS)CLF(RHS)USD/kg0Pp%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2201920202021202220232024%Asia-EuropeEurope-Middle EastEurope-North AmericaNorth America-AsiaIndustry averageMiddle East-AsiaWithin Asia 18 Quarterly Air Transport Chartbook-Q2 2024 4.Regional performance 4.1.Africa African airlines recorded a 14.9%YoY increase in RPK during Q2,even higher than the global industry average growth rate of 10.1%.This growth was driven by the remarkable 46.1%YoY increase in air passenger traffic between Africa and Asia in Q2,after a 64.7%YoY growth in Q1.This exceptional performance was buoyed by the ongoing international traffic recovery from China and other Asian countries.Traffic between Africa and the Middle East grew by 11.1%YoY,while traffic between Africa and Europe increased by a more modest 4.3%YoY,both showing some deceleration from Q1(Chart 30).Passenger capacity on African airlines,measured in ASK,increased by 8.3%YoY in Q2.This pushed the average PLF of African carriers to 75%,still below the global average of 84%.Notably,PLF on routes between Africa and Asia improved by six percentage points from Q1 to 75%in Q2(Chart 31).In the meantime,the average PLF on routes from Africa to the Middle East and to Europe stayed roughly level,at 75%and 81%,respectively.Note that routes between Africa and Europe,for example,are served not only by African but also by European and Middle Eastern airlines.Air cargo market growth in Africa followed the passenger side closely,with a 14.5%YoY increase in CTK for locally registered airlines.Meanwhile,capacity recorded a stunning 21.4%annual increase,resulting in an average CLF of 42%for Q2,down three percentage points from the prior quarter.Air cargo traffic between Africa and the Middle East remained unchanged compared to last year after a 12%rise in Q1(Chart 32).By contrast,traffic between Africa and Europe,the most important among the three major routes,grew by 10.2%YoY in Q1.Routes between Africa and Asia marked a major 35.5%YoY increase,following a 39.1%increase in Q1,indicating continued high demand.Air cargo traffic on this specific route area tripled over the past ten years,outgrowing all other route areas by a large margin.This rapid growth underscores the increasing importance of Africa as a trading partner for Asia.Air passenger traffic from Africa is predominantly directed towards the Middle East,Western Europe,the US,and China(Chart 33).In Q2,air passengers between Africa and China surged by 63%YoY,the highest growth among top destinations for African travelers.Traffic between Africa and Kuwait rose by 27%,while traffic to Saudi Arabia increased by 23%,maintaining Saudi Arabia as the top destination for flights from Africa.Conversely,air traffic from Africa to the US and Western Europe remained relatively stable compared to the previous year.In Q3,Ethiopia,Tanzania,and Ghana and are expected to lead the growth in air passenger traffic among top African destinations,signaling their rising appeal for tourism and business(Chart 34).In contrast,Egypt,Morocco,and Nigeria could see fewer passengers in Q3 based on Q2 tickets sales.Meanwhile,other major African destinations,such as South Africa and Kenya,remain relatively stable compared to 2023.African airlines have increased aircraft orders significantly since 2022,reflecting confidence in the regions aviation future.Specifically,29 aircraft are scheduled for delivery in 2024,with an additional 48 expected in 2025(Chart 35).19 Quarterly Air Transport Chartbook-Q2 2024 Chart 30:Africa,international air passenger traffic by route area,%YoY Source:IATA Sustainability and Economics.Notes:AE=Africa and Europe;AF=Africa and Far East;AM=Africa and Middle East.Chart 31:Africa,air passenger load factor by route area,share of ASK,%Source:IATA Sustainability and Economics.Notes:AE=Africa and Europe;AF=Africa and Far East;AM=Africa and Middle East.Chart 32:Africa,international air cargo traffic by route area,%YoY Source:IATA Sustainability and Economics.Notes:AE=Africa and Europe;AF=Africa and Far East;AM=Africa and Middle East.Chart 33:Traffic between Africa and its top 10 destinations,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 34:Africa,Q3 travels purchased during Q2 by market of destination,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 35:Africa,aircraft deliveries,2015-2023(delivered),2024-2025(scheduled)Source:IATA Sustainability and Economics using Cirium 1 Percent of industry RPK in 2023 Note:The total industry and regional growth rates are based on a constant sample of airlines combining reported data and estimates for missing observations.Airline traffic is allocated according to the region in which the carrier is registered;it should not be considered regional traffic.010203040506070AEAFAM%Q1 2024Q2 2024626466687072747678808284AEAFAM%Q1 2024Q2 2024051015202530354045AEAFAM%Q1 2024Q2 2024-10010203040506070%-15-10-5051015200203040506020152016201720182019202020212022202320242025Africa(Delivered)ScheduledNumber of commercial aircraftShare of total,%1RPKASKCTKACTKTOTAL MARKET10010.18.813.57.683.544.8 Africa2.114.98.314.521.474.542.0Q2 2024,%YoYPLFCLF 20 Quarterly Air Transport Chartbook-Q2 2024 4.2.Americas The Americas air passenger markets continued the upward trend in all route areas in Q2(Chart 36).The route area between Europe and North America,which reports the highest traffic levels connected to the Americas,grew by roughly 6%YoY in both Q1 and Q2.The second largest route area,between Asia and North America,saw a 21.1%YoY increase in Q1,following 29.3%YoY growth in Q1.Air passenger traffic within South America posted the largest annual improvement in Q2,with 26.9%YoY,as Mexico,Brazil,Colombia,and Ecuador continue to strengthen intraregional routes.The North America-Asia route area continued to register the highest air cargo traffic volume and marked 11%YoY growth in CTK in Q2,following a solid 9%YoY growth in Q1.Flights between Europe and North America,which carry the second largest air cargo volume,registered 7%growth YoY.Meanwhile,air cargo traffic within Central America,within South America,and between Central and South America all surged by more than 20%YoY(Chart 37).Traffic between North America and Asia Pacific increased markedly in Q2 2024.Passenger traffic from North America to China grew by 81%YoY,followed by Japan at 35%YoY.This materializes the long-awaited rehabilitation of the North America-to-Asia Pacific route after Chinas late reopening(Chart 38).Traffic to Costa Rica and the Dominican Republic has also grown by more than 10%compared to the year before,benefiting from the strong US dollar.Latin Americas top travel destinations are primarily divided between European and North American countries(Chart 39).European countries account for seven of the top 10 destinations,underscoring their importance to the region.Passenger traffic from Latin America to Italy and Spain saw significant growth in Q2,with YoY increases of 20%and 18%,respectively.Traffic to the US also grew substantially,with a 16%YoY increase,followed by Mexico with 11%and Canada with 10%,further strengthening the traffic flows within the Americas.As traffic has gained momentum in 2024,Chile and Peru can expect a 16%rise in air passenger demand in Q3,YoY.In contrast,Colombia,and Ecuador are likely to decelerate from a high 2023 base,with decreases of 13%and 5%,respectively.Argentinas air passenger traffic is also expected to drop by 8%from last year because of the countrys difficult economic situation(Chart 40).Carriers in the US and Canada-two of the worlds largest markets-will likely require more aircraft to meet operational needs going forward.This is already reflected in the 377 aircraft scheduled for delivery in 2024,and another 476 are scheduled for delivery in 2025(Chart 41).Latin American carries are closer to their optimal fleet levels and orders are trending down,from 107 aircraft are expected in 2024 to 92 deliveries in 2025.21 Quarterly Air Transport Chartbook-Q2 2024 Chart 36:Americas,international air passenger traffic growth by route area,%YoY Source:IATA Sustainability and Economics Notes:CS=Central America/Caribbean and South America;EC=Europe and Central America/Caribbean;EN=Europe and North America;ES=Europe and South America;FN=Far East and North America;MN=Middle East and North America;NC=North America and Central America/Caribbean;NS=North America and South America;PS=North/South America and Southwest Pacific;WC=Within Central America;WS=Within South America.Chart 37:Americas,international air cargo traffic by route area,%YoY Source:IATA Sustainability and Economics Notes:CS=Central America/Caribbean and South America;EC=Europe and Central America/Caribbean;EN=Europe and North America;ES=Europe and South America;FN=Far East and North America;MN=Middle East and North America;NC=North America and Central America/Caribbean;NS=North America and South America;PS=North/South America and Southwest Pacific;WC=Within Central America;WS=Within South America.Chart 38:Traffic between North America and its top 10 destinations,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 39:Traffic between Latin America and its top 10 destinations,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 40:Americas,Q3 travels purchased during Q2 by market of destination,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 41:Americas,aircraft deliveries,2015-2023(delivered),2024-2025(scheduled)Source:IATA Sustainability and Economics using Cirium 1 Percent of industry RPK in 2023 Note:The total industry and regional growth rates are based on a constant sample of airlines combining reported data and estimates for missing observations.Airline traffic is allocated according to the region in which the carrier is registered;it should not be considered regional traffic.05101520253035CSECENESFNMNNCNSPSWCWS%Q1 2024Q2 2024-20-10010203040CSECENESFNMNNCNSPSWCWS%Q1 2024Q2 2024010203040506070809010152025%-20-15-10-505101520010015020025030035040045050020152016201720182019202020212022202320242025North America(Delivered)ScheduledLatin America(Delivered)ScheduledNumber of commercial aircraftShare of total,%1RPKASKCTKACTKTOTAL MARKET10010.18.813.57.683.544.8North America24.25.07.08.54.185.339.4Latin America5.58.36.511.810.983.235.9Q2 2024,%YoYPLFCLF 22 Quarterly Air Transport Chartbook-Q2 2024 4.3.Asia Pacific Airlines in the Asia Pacific region continued to see stellar traffic growth in Q2 2024,with RPK increasing 14.8%YoY,significantly higher than the global average of 10.1%YoY(Chart 42).The removal of visa requirements for travelers from key markets including China and India boosted traffic demand.This is reflected in a robust Q2 performance on several key routes,with annual increases of 46tween Africa and Asia,34%within Asia,and 29tween Asia and Europe.However,growth decelerated in Q2 compared to Q1 on all key routes.This includes traffic between the Southwest Pacific and the Americas,which slowed to a mere 4%annual growth in Q2 2024,down from 18%in Q1 and the lowest figure among route areas out of Asia Pacific.Air cargo traffic(CTK)for Asia Pacific airlines grew by 16.3%YoY in Q2 2024,surpassing the global average of 13.5%.Routes between Asia and North America grew by 11%YoY,and those between Asia and Europe by 19%,and these are the largest two air cargo route areas in the region(Chart 43).The regions expansion was further supported by routes between Africa and Asia,up 35%YoY,and between Asia and the Pacific,which gained 29%YoY.Strong exports out of major markets such as China,Japan,the Republic of Korea,and Vietnam continued to underpin the growth in CTK of the airlines in the region.North America,Europe,and the Middle East have been important markets for the Asia Pacific region(Chart 44).Specifically,traffic between Asia Pacific and Italy grew by 27%YoY in Q2 2024,while traffic between Asia Pacific and Trkiye increased by 33%during the same period.This growth is largely driven by traffic from China,whose traffic to Europe nearly doubled YoY in Q2.Traffic between Japan and Europe also contributed significantly.In contrast,traffic to the US,the largest destination from the Asia Pacific region,registered a modest 16%YoY increase.Most of the international air traffic from China continued to be concentrated within the Asia Pacific region,followed by flights to and from Europe.Traffic from China to North America region has struggled.Notably,North America is the only region where flights from China are less than half of their 2019 levels(Chart 45).On the other hand,the Middle East has become the first and only region whose flights to China exceed 2019 levels,highlighting its enhanced role in connecting Europe and Asia because of Russias airspace restrictions.Travel demand is expected to remain strong for the next quarter(Chart 46).Tickets sold for flights to Japan in Q3 increased a stunning 21%YoY,as the weak Japanese yen boosts the countrys appeal to foreign tourists.Thailand recently expanded its visa-free entry to people from 93 countries and territories,up from 57,and expects a 28%YoY increase in air passenger traffic.Korea,India,and Chinese Taipei are also likely to see YoY increases of over 10%during the summer.In contrast,the Philippines is the only country in the region where Q3 ticket sales are declining.The strong performance of the Asia-Pacific region is reflected in aircraft orders,with 568 commercial aircraft scheduled for delivery in 2025,up from 301 deliveries in 2024(Chart 47).23 Quarterly Air Transport Chartbook-Q2 2024 Chart 42:Asia Pacific,international air passenger traffic by route area,%YoY Source:IATA Sustainability and Economics Notes:AF=Africa and Far East;EF=Europe and Far East;FN=Far East and North America;FP=Far East and Southwest Pacific;MF=Middle East and Far East;PS=North/South America and Southwest Pacific;WF=Within Far East.Chart 43:Asia Pacific,international air cargo traffic by route area,%YoY Source:IATA Sustainability and Economics Notes:AF=Africa and Far East;EF=Europe and Far East;FN=Far East and North America;FP=Far East and Southwest Pacific;MF=Middle East and Far East;PS=North/South America and Southwest Pacific;WF=Within Far East.Chart 44:Traffic between Asia Pacific and its top 10 destinations,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 45:China,air passengers to and from other regions,Q2 each year,index Source:IATA Sustainability and Economics,based on data from DDS Chart 46:Asia Pacific,Q3 travels purchased during Q2 by market of destination,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 47:Asia Pacific,aircraft deliveries,2015-2023(delivered),2024-2025(scheduled)Source:IATA Sustainability and Economics using Cirium 1 Percent of industry RPK in 2023 Note:The total industry and regional growth rates are based on a constant sample of airlines combining reported data and estimates for missing observations.Airline traffic is allocated according to the region in which the carrier is registered;it should not be considered regional traffic.010203040506070AFEFFNFPMFPSWF%Q1 2024Q2 2024051015202530354045AFEFFNFPMFPSWF%Q1 2024Q2 2024051015202530350100150200250Asia PacificEuropeNorth America Middle EastAfricaLatin America2015201620172018201920202021202220232024Index,2015=100-10-50510152025300020030040050060070080090020152016201720182019202020212022202320242025Asia Pacific(Delivered)ScheduledNumber of commercial aircraftShare of total,%1RPKASKCTKACTKTOTAL MARKET10010.18.813.57.683.544.8Asia Pacific31.714.810.016.39.282.446.3Q2 2024,%YoYPLFCLF 24 Quarterly Air Transport Chartbook-Q2 2024 4.4.Europe European airlines RPK grew by 9.2%YoY in Q2,slightly below the global average.Within Europe,the most important route area involving the region,traffic grew by 10%in Q2,down from 13%in Q1,and still confirming robust intra-European travel demand(Chart 48).Routes between Europe and North America,another large market,gained 6%YoY in Q2,unchanged from Q1.Europe-Asia saw the highest growth in Q2 at 29ter an extraordinary surge of 41%in Q1.Seat capacity of European airlines increased by 9.2%YoY in Q2,and thus perfectly balanced with respect to demand.This allowed the region to post the highest PLF among all regions at 85%.This is two percentage points higher than the global average.The route with the highest PLF was between Europe and the Americas,and within Europe,all above 85%(Chart 49).Notably,the average PLF on the route between Europe and North America jumped an impressive seven percentage points from Q1 to 86%.Routes between Europe and Asia as well as between Europe and the Middle East saw their PLFs decline from Q1,but still exceed 80%.European airlines carried 15.8%more CTK than in Q2 2023,which pushed the cargo load factor to 52%,the highest among all regions and over six percentage points higher than the global average.The traditionally important route area between Europe and Asia remained busy and maintained its growth rate of 19%YoY from Q1 also in Q2(Chart 50).Air cargo between Europe and the Middle East gained 32%YoY in Q2,following an outstanding 41%increase in Q1.North America remains a top destination for Europeans,with traffic increasing by 10%and 13%YoY from Europe to the US and Canada,respectively,in Q2(Chart 51).Traffic to Asia is also a significant component of international travel from Europe.The route to China has surged an eye watering 91%YoY and Japan too has seen impressive expansion at 41%.In the Middle East,Saudi Arabia benefited from a 50%increase in passenger traffic from Europe,while the United Arab Emirates recorded healthy but more modest 12%YoY increase.In contrast,Israel,once a key destination,experienced a sharp 21cline in traffic from Europe in Q2,impacted by the war in Gaza.Most European countries can expect growth in incoming traffic this summer,as indicated by forward booking data(Chart 52).The UK,Europes largest destination,is expected to see a moderate increase of 4%YoY in Q3 2024.In Western Europe,France is the only country where summer traffic is expected to fall from last year.This suggests an unexpected negative impact of the Olympics on tourism,as many opted to avoid the anticipated crowds and disruptions associated with the event.Trkiye might also see a decline,with Q3 travel projected to fall by 13%YoY,cooling from last years exceptionally strong performance.Southern Europe,including Italy,Spain,and Greece,continues to attract strong tourist inflows during the summer,with each country likely benefiting from more than 7%YoY growth in traffic.Northern Europe,including Norway,Ireland,and Sweden,should see gains of around 5%YoY.Notably,Iceland could see a surge of 30%in travelers in Q3.Iceland is obviously growing rapidly as a tourist destination,but its market size is less than one-tenth of Italys.European airlines have been increasing their aircraft orders since 2021(Chart 53).Following 368 aircraft scheduled in 2024,an additional 434 are planned for 2025.25 Quarterly Air Transport Chartbook-Q2 2024 Chart 48:Europe,international air passenger traffic by route area,%YoY Source:IATA Sustainability and Economics Note:AE=Africa and Europe;EC=Europe and Central America/Caribbean;EF=Europe and Far East;EM=Europe and Middle East;EN=Europe and North America;ES=Europe and South America;WE=Within Europe.Chart 49:Europe,air passenger load factor by route area,share of ASK,%Source:IATA Sustainability and Economics Note:AE=Africa and Europe;EC=Europe and Central America/Caribbean;EF=Europe and Far East;EM=Europe and Middle East;EN=Europe and North America;ES=Europe and South America;WE=Within Europe.Chart 50:Europe,international air cargo traffic by route area,%YoY Source:IATA Sustainability and Economics Note:AE=Africa and Europe;EC=Europe and Central America/Caribbean;EF=Europe and Far East;EM=Europe and Middle East;EN=Europe and North America;ES=Europe and South America;WE=Within Europe.Chart 51:Traffic between Europe and its top 10 destinations,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 52:Europe,Q3 travels purchased during Q2 by market of destination,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 53:Europe,aircraft deliveries,2015-2023(delivered),2024-2025(scheduled)Source:IATA Sustainability and Economics using Cirium 1 Percent of industry RPK in 2023 Note:The total industry and regional growth rates are based on a constant sample of airlines combining reported data and estimates for missing observations.Airline traffic is allocated according to the region in which the carrier is registered;it should not be considered regional traffic.051015202530354045AEECEFEMENESWE%Q1 2024Q2 202472747678808284868890AEECEFEMENESWE%Q1 2024Q2 2024-5051015202530354045AEECEFEMENESWE%Q1 2024Q2 2024-40-20020406080100%-20-15-10-505101520253035010015020025030035040045050020152016201720182019202020212022202320242025Europe(Delivered)ScheduledNumber of commercial aircraftShare of total,%1RPKASKCTKACTKTOTAL MARKET10010.18.813.57.683.544.8Europe27.19.29.215.810.385.551.6Q2 2024,%YoYPLFCLF 26 Quarterly Air Transport Chartbook-Q2 2024 4.5.Middle East Middle East airlines carried 11.4%more air passenger traffic in Q2 2024 than in 2023,slightly outpacing the global average of 10.1%(Chart 54).The busiest route area,Middle East-Asia,grew the fastest at 14%YoY.This was followed by routes between Europe and the Middle East,at 12%YoY.Routes between Africa and the Middle East saw an increase of 11%YoY,while Middle East-North America expanded by 8%.These healthy numbers were nevertheless all lower in Q2 YoY than in Q1.With a 9.4%growth in capacity as measured in ASK,Middle East airlines registered a PLF of 80%,slightly below the global average.Flights between the Middle East and North America recorded a PLF as high as 86%in Q2,up one percentage point from the Q1 figure(Chart 55).This was followed by the Middle East-Asia route area,which recorded an average PLF of 82%in Q2,and by Middle East-Europe,at 80%.Flights between Africa and the Middle East lagged the other route areas with an average PLF of 75%.Air cargo traffic carried by Middle Eastern airlines grew by 13.2%YoY,significantly higher than the equivalent 4.9%increase in capacity.This resulted in an improvement in the regional CLF to 46%in Q2,just above the global 45%average.Demand growth among route areas was uneven,with the busiest two routes,Middle East to Asia and Middle East to Europe,adding15%and 32%,respectively,both below the growth rates seen in Q1(Chart 56).Meanwhile,traffic between the Middle East and Africa remained roughly unchanged.CTK registered on the Middle East-North America trade lane continued to fall YoY in Q2.Almost all top destinations from the Middle East posted gains in Q2(Chart 57).Air passenger traffic from the Middle East to China grew 65%YoY,followed by a 33%increase to Egypt.Passenger traffic to the UK,Trkiye,the Philippines,and India all added more than 10%.In contrast,passenger traffic to Pakistan,the US,Germany,and Canada remained largely unchanged compared to the year prior.However,war is deterring many potential visitors.Looking ahead,most Middle East destinations can anticipate a contraction in air passenger traffic in Q3 based on Q2 air ticket sales(Chart 58).For example,traffic to Lebanon is expected to drop by 27%,while traffic to Israel,Qatar,Kuwait,and Oman is projected to decline between 10%and 15%.The United Arab Emirates and Bahrain should see a 4cline compared to last year.Meanwhile,Saudi Arabia will likely grow by 10%and remain the largest air traffic destination in the region.Iran too could expand by12%in Q3,though it continues to struggle to return to 2019 levels.Despite these challenges,Middle Eastern airlines are showing confidence in the industrys future by expanding their fleets over the next two years(Chart 59).Following the successful delivery of 96 aircraft in 2023,58 are scheduled for 2024,and 129 new aircraft are set to join the fleet in 2025.27 Quarterly Air Transport Chartbook-Q2 2024 Chart 54:Middle East,international air passenger traffic by route area,%YoY Source:IATA Sustainability and Economics Notes:AM=Africa and Middle East;EM=Europe and Middle East;MF=Middle East and Far East;MN=Middle East and North America.Chart 55:Middle East,air passenger load factor by route area,share of ASK,%Source:IATA Sustainability and Economics Note:AM=Africa and Middle East;EM=Europe and Middle East;MF=Middle East and Far East;MN=Middle East and North America.Chart 56:Middle East,international air cargo traffic by route area,%YoY Source:IATA Sustainability and Economics Note:AM=Africa and Middle East;EM=Europe and Middle East;MF=Middle East and Far East;MN=Middle East and North America.Chart 57:Traffic between the Middle East and its top 10 destinations,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 58:Middle East,Q3 travels purchased during Q2 by market of destination,%YoY Source:IATA Sustainability and Economics,based on data from DDS Chart 59:Middle East,aircraft deliveries,2015-2023(delivered),2024-2025(scheduled)Source:IATA Sustainability and Economics using Cirium 1 Percent of industry RPK in 2023 Note:The total industry and regional growth rates are based on a constant sample of airlines combining reported data and estimates for missing observations.Airline traffic is allocated according to the region in which the carrier is registered;it should not be considered regional traffic.02468101214161820AMEMMFMN%Q1 2024Q2 2024758082866870727476788082848688AMEMMFMN%Q1 2024Q2 2024124124-203215-1-5051015202530354045AMEMMFMN%Q1 2024Q2 2024117101813311265-2-10010203040506070-4-10-15-10-27-9-10-412-30-25-20-15-10-505101520040608010012014020152016201720182019202020212022202320242025Middle East(Delivered)ScheduledNumber of commercial aircraftShare of total,%1RPKASKCTKACTKTOTAL MARKET10010.18.813.57.683.544.8Middle East9.411.49.413.24.979.946.3Q2 2024,%YoYPLFCLF Iata.org/economics economicsiata.org
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Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China1KE CHEN,LULU XUETECHNO-ECONOMIC FEASIBILITY ANALYSIS OF ZERO-EMISSION TRUCKS IN URBAN AND REGIONAL DELIVERY USE CASES:A CASE STUDY OF GUANGDONG PROVINCE,CHINAWRI.ORG.CN2WRIDesign and Layout by:Harry Zhang ACKNOWLEDGEMENTS Suggested Citation:Chen,K.,and L.Xue.2024.“Techno-Economic Feasibility Analysis of Zero-Emission Trucks in Urban and Regional Delivery Use Cases:A Case Study of Guangdong Province,China.”Report.Beijing:World Resources Institute.Available online at https:/doi.org/10.46830/wrirpt.24.00006.This project is part of the NDC Transport Initiative for Asia(NDC-TIA).NDC-TIA is part of the International Climate Initiative(IKI).IKI is working under the leadership of the Federal Ministry for Economic Affairs and Climate Action,in close cooperation with its founder,the Federal Ministry of Environment and the Federal Foreign Office.For more visit:https:/www.ndctransportinitiativeforasia.org/.The authors would like to thank the Shenzhen Xieli Innovation Center of New Energy and Intelligent Connected Vehicle and Foshan Institute of Environmental and Energy Technol-ogy for their tremendous support in facilitating the interviews for this study.The authors would like to thank World Resources Institute internal reviewers:Stephanie Ly,Pawan Mulukutla,Sharvari Patki,Cristina Albuquerque,Weiqi Zhou,and Daiyang Zhang.We would also like to thank our external reviewers:Craglia Matteo(International Transport Fo-rum),Owen MacDonnell(CALSTART),Elizabeth Connelly(International Energy Agency),Hei Chiu(the World Bank),Huanhuan Ren(China Automotive Technology and Research Center),Chunxiao Hao(Vehicle Emission Control Center),Rui Wu(Transport Planning Research Institute of the Ministry of Transport),Zhenhong Lin(South China University of Technology),and Xiuli Zhang(Energy Innovation).Their reviews do not imply endorsement of the content of this report.Any errors are the authors own.Thank you also to Li Fang,Hong Miao,Zhe Liu,Adriana Kocornik-Mina,Anne Maassen,Caroline Taylor,Ye Zhang,Romain Warnault,and Allison Meyer for advice,editing,design,and administrative support.Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,ChinaITABLE OF CONTENTSIII Executive Summary1 Introduction7 Research methodology9 Definition of use cases12 Method of ZETs key component sizing18 Method of purchase cost estimation 21 Method of TCO estimation27 Research results28 Results for 202233 Results from MY2022 to MY203066 Applicability to other Chinese cities should be treated with caution69 Conclusions and recommendations73 Appendices73 Appendix A.Access privileges for new energy trucks in selected cities in Guangdong74 Appendix B.Interviews conducted for this study75 Abbreviations75 Endnotes76 ReferencesIIWRITechno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,ChinaIIIEXECUTIVE SUMMARYHIGHLIGHTS To tackle small fleet operators concerns and accelerate zero-emission truck(ZET)adoption,we assessed the techno-economic feasibility of ZETs over the time frame of 20222030 across use cases in different model years(MYs)for Shenzhen and Foshan in Guangdong Province.The promotion of battery electric trucks(BET)in urban delivery,port operation,and drayage duty cycles should be prioritized because their total cost of ownership(TCO)parity with diesel trucks will be reached before MY2025,particularly with comprehensive policy incentives.Proposed comprehensive policies in this study are effective to move ZET TCO parity years with diesel trucks earlier than MY2025 in most use cases.BETs benefited more from the comprehensive policies in TCO parity year reduction than fuel-cell electric trucks(FCETs).Choosing BETs with smaller batteries,ensuring that charging facilities are sufficiently available,and adjusting operation schedules to allow for multiple within-day charges are important to reduce BETs TCO.Gaps in purchase costs between ZETs and internal combustion engine vehicles(ICEVs)remain large by MY2030,although TCO parity is reached in most use cases.Therefore,financing mechanisms like leasing are essential to ease ZETs up-front cost burdens.Given the day-to-day operational variability of small fleet operators,it is critical to design BETs to ensure operational flexibility,cost effectiveness,and mass production.IVWRIAbout this report To reduce carbon and air pollutant emissions,promoting ZETsreferring to battery electric trucks and fuel-cell electric trucksis important(Xue and Liu 2022).Unlike buses and private cars,the trucking industry is dominated by small-and medium-sized enterprises(SMEs)in China(TUC 2022a).Currently,ZETs in Chinese cities were primarily adopted by large fleet operators that were less cost-sensitive.Now,to further promote ZETs,addressing the demand side,particularly more cost-conscious and less technology-savvy SMEs concerns,is critical for ZETs future uptake.From the demand perspective,small fleet operators are often concerned about the following issues related to ZET transition:(1)whether the operation of ZETs is technologically feasible where range constraints or payload loss can be avoided;(2)whether purchase cost gaps between ZETs and ICEVs are acceptably small;and(3)whether TCO parity with equivalent ICE trucks can be reached(Tol et al.2022).To tackle demand-side concerns and ramp up ZET adoption,it is important to understand the current operational and cost challenges of ZETs,what interventions are effective in overcoming the challenges,and which use case and zero-emission technology to prioritize and when.To address the questions mentioned earlier,this study chooses one of Chinas front-runner regions of ZET transition,Guangdong Province,as an example.To reduce the data collection efforts,we choose the cities of Shenzhen and Foshan in Guangdong for in-depth analysis.The two cities are not only leading ZET transitions in Guangdong,but also set ambitious goals for ZET adoption.We assessed the techno-economic feasibility of ZETs over the time frame of 20222030 across different use cases and MYs.The base year is set to 2022 where the most recent data are available.The analysis was carried out for 14 localized use cases:Five truck segments,including delivery vans,4.5-t(ton)light-duty trucks(LDTs),18-t straight trucks,31-t dump trucks,and 42-t tractor trailers.Four duty cycles,namely,urban delivery(UD),regional delivery(RD),port operation(PO),and drayage duty cycles(DDC).Two types of goods transported,including light cargo and heavy cargo.In this study,the techno-economic feasibility of ZETs is assessed in different use cases,based on three variables essential for small fleet operators to decide if ZET transition is feasible(Hunter et al.2021;Tol et al.2022):ZETs operational feasibility.In this study,operational feasibility is evaluated by the Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,ChinaVsizes of key components for ZETs,including energy storage capacities,peak power outputs,and curb weights,to meet the ranges and wheel power demands in different use cases during MY2022 and MY2030.The resulting component sizing is useful to find the proper ZET models for the given use case that can come at a reasonable cost and meet the day-to-day operational requirements.Differences of purchase costs between ZETs and ICEVs.Here,ZETs purchase costs are projected based on the technology progress of key components(such as battery packs,electric drives,fuel cell(FC)systems,and hydrogen storage tanks)characterized by the learning curve outlined by Yelle(1979)in which the reduction in unit costs of each key component is a function of accumulated production volumes.We further employed existing literature and market predictions to validate and adjust the projections.TCO gaps between ZETs and ICEVs.TCO was evaluated by adding up the capital,operation,and maintenance expenditure of the vehicles;the mid-life replacement costs of key components(such as battery packs);and the opportunity costs of the loss in ZETs payload capacity.Due to limited data availability,costs such as vehicle residual values and refueling labor costs are not considered in this study.The use cases with near-term opportunities for ZET transition are identified,based on ZETs TCO parity years with ICEVs.Further,we evaluate the possible roles played by different interventionsincluding technological development,policy incentives,operational improvements,and business modelsin affecting the previously mentioned decision variables and in accelerating the achievement or advances of TCO parity years relative to diesel trucks.Further,we used an example to illustrate if the conclusions could be applied to other cities and discussed the caveats and uncertainties of the analysis.Research findingsA.Without ZET incentives,BET promotion in PO,DDC,and urban delivery(UD)could be prioritized,given that the TCO parity with ICE trucks in these use cases will be reached earlier than other use cases.1.BETs,except for dump trucks,have TCO cost advantages in PO,DDC,and UD in absence of ZET incentives.In these use cases,BETs will reach TCO parity relative to ICEV counterparts before MY2027.This is because BETs are much more energy efficient than ICEVs in PO and UD by taking advantage of frequent stop-and-goes to recoup energies from regenerative braking.By contrast,battery electric dump trucks are less cost advantageous,because of the prominent payload loss issue.Particularly in two instances:Battery-electric 42-t tractor trailers in PO,DDC,and UD will reach TCO parity with diesel tractor trailers before MY2025,representing one of the most promising truck segments to be electrified at the moment.This is because:(1)BET tractor trailers in Shenzhen and Foshan mostly carry lightweight goods and(2)operational optimization measures taken by fleet operators in DDCincluding using small battery capacities to fulfill the operation and matching BET configurations with charging facility availabilityare helpful for BET to reach TCO parity early,relative to diesel trucks.Battery-electric 4.5-t LDTs and straight trucks in UD will reach TCO parity relative to their diesel counterparts by MY2027.Particularly,when carrying lightweight goods,both vehicle segments have achieved cost parity now(MY20222023),whereas when transporting heavy goods,the parity years will be postponed to MY20252027 after being penalized for the payload losses.By contrast,FCETs TCO are lower than BETs in RD.In RD,ZETs TCO cost parity relative to ICEVs will be achieved around MY20282030,much later than UD.BETs are less cost advantageous in RD because:(1)ICEVs are relatively more energy-efficient for high-speed highway driving than urban driving;(2)for simplicity,this study does not differentiate FCETs energy efficiency between UD and RD;therefore,we may have given FCETs more cost advantages in RD.VIWRIFigure ES-1|ZET TCO parity relative to ICEVs for all use casesNote:This study assumes that the useful life of the 31-t dump truck is five years and that of other vehicle segments are six years based on Pers.Comm.(2023a).Abbreviations:TCO=total cost of ownership;BET=battery electric truck;FCET=fuel cell electric truck;ICEV=internal combustion engine vehicle;H2-only=hydrogen-only mode;hybrid=hybrid mode;VKT=vehicle kilometers traveled;UD=urban delivery;RD=regional delivery;PO_TRIP=port operation(using the trip distance method);PO_DVKT=port operation(using the daily VKT method);DDC_TRIP=drayage duty cycle(using the trip distance method);DDC_DVKT=drayage duty cycle(using the daily VKT method).Source:WRI authors calculation.VEHICLE DUTY CYCLE CARGO TYPEDAILY VKT(KM)4.5-t LDTUDLight goods 200300Heavy goods200300RDLight goods 300400500Heavy goods30040050018-t straight truckUDLight goods 200300Heavy goods200300RDLight goods 300400500Heavy goods30040050031-t dump truckUDHeavy goods20030042-t tractor trailerPO_TRIPLight goods 200300PO_DVKT200300DDC_TRIP200300400500DDC_DVKT200300400500UD200300RD300400500BETFCET(H2-only)FCET(hybrid)2022202620242028202320272030Above 203020252029Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,ChinaVII2.Changes in energy prices will greatly affect ZETs parity years with ICE trucks in some use cases.The previously mentioned conclusion on TCO parity years is valid when the diesel price is at the 2022 level of 8.1 Chinese Yuan(CNY)/liter and the charging cost is fixed at 1.2 CNY/kWh.If diesel prices drop to the 2019 and 2021 average price of 6.5 CNY/L,and charging costs rises to 1.4 CNY/kWh and above(due to widespread adoption of ultra-fast chargers),battery electric trucks will achieve TCO parity with diesel trucks at a much later time for 42-t tractor trailers in DDC(parity year=MY2030)and 18-t ton straight trucks in UD with light goods transportation(parity year=MY2030).Similarly,for FCETs,if the diesel prices remain at the 2022 level,the break-even green hydrogen price in MY2030 is around 30 CNY/kg.However,if the diesel prices drop to the 2021 average price,FCETs are unlikely to achieve TCO parity with diesel trucks at any time before MY2030.Therefore,with lower diesel prices,removal of diesel subsidies(Black et al.2023),increased taxes on diesel prices(OECD 2022),or alternative energy incentives(on electricity and hydrogen)should be considered,to maintain the cost competitiveness of ZETs.B.Comprehensive policies are effective to move ZET TCO parity years with ICE trucks earlier,especially for BETs.In this study,we focus on the comprehensive(national and local)policies the impacts of which on TCO can be quantified under this studys TCO methodology framework,including purchase subsidy,tax exemption,energy(electricity/hydrogen fuel)incentives,carbon pricing on conventional fuels,road access privileges,reduction of expressway road tolls,increases of maximum authorized weights of ZETs(also known as ZET weight allowance),and financing cost reductions.1.There is no silver bullet.Comprehensive policy incentives are more effective to bringing forward ZETs TCO parity years to an earlier date than single measures.BETs TCO parity years benefit more from the proposed comprehensive policies in this study.Under the combination of the proposed policies in this study(without a BET purchase subsidy),BETs will reach TCO parity with diesel counterparts in most use cases before MY2025,zero to nine years earlier than the case without policy incentives.By contrast,even with greater amounts of subsidies(including an FCET purchase subsidy),FCETs will reach TCO parity with diesel counterparts by MY20222028,three to six years earlier than the case without policy incentives.Overall,with the eight proposed policy incentives,the TCO parity years of BETs are zero to six years earlier than FCETs in most use cases,making BETs the most cost-competitive ZET option.2.The impacts of policies on ZETs TCO parity years and TCO reduction are use-case-specific.ZETs benefit from the proposed policies of tax exemption,energy incentives,road access privileges,reduction of expressway road tolls,financing cost reduction,and increases of maximum authorized vehicle weights in this study in TCO reduction.The improvement in cost parity is not significant when applying the carbon pricing measure due to Chinas current low carbon prices.Specifically,the proposed purchase and ownership tax exemption and energy incentives are essential to bridge the TCO gaps between ZETs and ICEVs,for most use cases;road access privileges for ZETs are more effective in RD and DDC because we assume that the policy works on vehicle kilometers traveled(VKTs),and both use cases have long VKTs;the reduction of expressway road tolls is more influential for 42-ton tractor trailers RD and DDC because the two use cases have large shares of VKTs on expressways and high toll rates;the ZET weight allowance is useful for heavy goods transportation;and the financing cost reduction is conducive to moving forward TCO parity years in UD.3.The FCET purchase subsidy analyzed in this study is found to be one of the most influential policy interventions for FCETs TCO reduction;but governments VIIIWRIshould refrain from using large purchase subsidies to boost ZET adoption to avoid oversupply of truck capacities in the market.With the purchase subsidy assumed in this study,FCETs time to TCO parity is reduced by zero to two years for all use cases,achieving TCO parity with its diesel counterpart by MY20262030.Of note,considering that large public subsidies to promote ZETs would distort the market supply of truck capacities and reduce ZETs cost competitiveness(Pers.Comm.2023a),governments should refrain from using large purchase subsidies to stimulate ZET adoption.Instead,scrappage subsidies or other non-subsidy measures such as road access privileges offer viable alternatives.Figure ES-2|ZET TCO parity relative to ICEVs with policy incentivesa.18-t straight truckFCET(H2-only)Above 2030Above 2030202720272030203020262026202920292025202520282028202420242023202320222022No policy BETNo policy Policy packageRoad charge reductionRoad access privilege Tax exemptionZET weight allowanceTax exemptionZET weight allowanceRoad charge reductionRoad access privilege Carbon pricingHydrogen subsidy Financing cost reduction Purchase subsidyCarbon pricingPolicy packageUDRDLight goods-200 kmLight goods-500 kmHeavy goods-200 kmHeavy goods-500 kmCharging subsidyFinancing cost reduction Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,ChinaIXFigure ES-2|ZET TCO parity relative to ICEVs with policy incentives(cont.)b.31-t dump truckAbove 2030FCET(H2-only)202720302026202920252028202420232022No policy BETNo policy Policy packageRoad charge reductionRoad access privilege Tax exemptionZET weight allowanceTax exemptionZET weight allowanceRoad charge reductionRoad access privilege Carbon pricingHydrogen subsidy Financing cost reduction Purchase subsidyCarbon pricingPolicy packageUDHeavy goods-200 kmHeavy goods-300 kmCharging subsidyFinancing cost reduction XWRIFigure ES-2|ZET TCO parity relative to ICEVs with policy incentives(cont.)c.42-t tractor trailerNote:For a 42-t tractor trailer,DDC denotes the DDC_TRIP use cases for BETs and the DDC_DVKT use cases for FCETs.Source:WRI authors calculation.FCET(H2-only)202720272027203020302030Above 2030Above 2030Above 2030202620262026202920292029202520252025202820282028202420242024202320232023202220222022No policy BET No policy Policy packageRoad charge reductionRoad access privilege Tax exemptionZET weight allowanceTax exemptionZET weight allowanceRoad charge reductionRoad access privilege Charging subsidyFinancing cost reduction Carbon pricingHydrogen subsidy Financing cost reduction Purchase subsidyCarbon pricingPolicy packageDDCUDRDLight goods-200 kmLight goods-200 kmLight goods-500 kmLight goods-500 kmTechno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,ChinaXIC.Apart from policies,financing mechanisms,operational optimization,and technology improvements are also essential to accelerate the adoption of ZETs.1.Financing mechanisms are essential to ease ZETs up-front purchase costs.Although the TCO parity with ICE trucks is reached in most use cases by MY2030,tremendous gaps in purchase costs between ZETs and ICEVs remain.By MY2030,the purchase costs of ZETs are still 53 to 181 percent higher than those of ICEVs in all use cases examined by this study.To ease fleet operators burden on costly up-front expenses of ZETsparticularly for small fleet operatorsand allocate the risks of ZET transition to appropriate stakeholders,it is necessary for private and public players to take actions,including reducing the minimum down payment requirements on ZET loans;encouraging ZET leasing or battery swapping;unlocking green Figure ES-3|Percentage differences in purchase costs between ZETs and ICEVs for MY2030finance(through reduced interested rates and extended repayment terms)and blended finance for ZET financing;and providing tax benefits,flexible depreciation,or first loss guarantees for new business models.2.Operational optimization is a necessary measure to reduce costs and improve operational feasibility.As in the case of DDC,choosing BETs with smaller batteries,ensuring charging facilities are sufficiently available,and adjusting operation schedules to allow BETs for more than one charge a day are important to reduce BETs TCO.For this type of operation to work,it is crucial to have:(1)broad availability of(ultra)-fast charging facilities,parking spaces,and grid capacities at the DDCs customer locations(Kotz et al.2022);and(2)BETs operation schedules that allow for sufficient charging time windowsfor example,timing charging with loading(or unloading)of trucks or break times of drivers.Note:The percentage represents the difference in the purchase costs between ZETs and comparable ICEVs divided by the purchase costs of ICEVs,that is,(ZET-ICEV)/ICEV.Zero percent indicates no difference between the purchase costs of ZETs and ICEVs.No purchase subsidy or tax is considered for the purchase costs.Abbreviations:BET=battery electric truck;FCET=fuel cell electric truck;ICEV=internal combustion engine vehicle;VKT=vehicle kilometers traveled;UD=urban delivery;RD=regional delivery;PO_TRIP=port operation(using the trip distance method);DDC_DVKT=drayage duty cycle(using the daily VKT method);DDC_TRIP=drayage duty cycle(using the trip distance method).Source:WRI authors calculation.a.4.5-t LDT b.42-t tractor trailer 00200 00000000000 %UDUDPO_TRIPDDC_DVKTPO_DVKTRDRDDDC_TRIPBETFCETXIIWRI3.Accelerating technology developments is essential to reduce ZETs TCO and move its parity years to an earlier date.Battery cost reduction,vehicle energy-efficiency improvement,and battery energy density increases are critical for reducing BETs TCO,while the cost reduction of the FC systems and green hydrogen prices are essential to bring down FCETs TCO(FC system costs are more influential for UD,while hydrogen prices are more important for RD).4.It is important to design BETs with flexibility.Significant variations in BET battery capacities exist.For example,even within the same-use case,the differences in battery capacities of BETs examined in this study could vary by 51 kWh to 322 kWh in MY2025.Given the day-to-day operational variability of small fleet operators,designing a broadly applicable BET that is capable of meeting the majority operation(in terms of ranges)in an often-applied use case is critical.This means both Original Equipment Manufacturers(OEMs)and fleet operators should have a thorough understanding of existing diesel fleets daily mileage profiles.D.Data-driven and multi-dimensional policymaking is necessary.1.Data on ZETs energy efficiency and existing diesel truck fleets mileage are important to improve the TCO estimation and to inform policymaking.Energy efficiency would greatly affect ZETs parity years and determine which use case to prioritize ZET promotion.Further,truck fleets mileage profiles are also critical to the design of broadly applicable ZETs.Therefore,it is important for governments to gather ZETs real-world energy-efficiency and ICEVs mileage data by use case and share among key stakeholders,such as OEMs.2.Fleet operators in reality would also take multiple factors into consideration,such as the safety and security of ZETs,shippers requirements,market demands and profitability,and customers awareness of the recent development of ZETs when deciding if ZET transition is feasible(QTLC and MOV3MENT 2022).Therefore,it is also necessary to go beyond the policies examined in this study to consider more policy options,such as enhancing ZETs fire safety,enforcing air pollution prevention policies,improving ZETs residual values,and organizing public education campaigns(particularly for small fleet operators).E.The conclusions from the study would be applicable to cities with similar use case characteristics,including truck segment deployed,type of goods transported,driving cycles,and ambient temperature.Cities with different characteristics should be cautious when applying this studys conclusions.For example,a 49-ton BET100 tractor trailer in Tangshans DDC had reached TCO parity with its diesel counterpart in MY2022,earlier than Shenzhen examined in this study.This is because tractor trailers in Tangshan do not require large battery capacities(trip distances within 100 km)and have a large proportion of the daily VKTs performed near docks or in the urban environment(Mao et al.2023).Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,ChinaXIIIFigure ES-4|ZETs TCO parity years relative to ICE trucks for the DDC use case in Shenzhen and TangshanNote:This study assumes that the trip distance for Tangshans DDC use case is 100 km,while that for Shenzhen is 200 km.Further,the energy consumption of a MY2022 49-t diesel tractor trailer is 64L/100 km,a BET is 230kWh/100 km,and an FCET is 18kg/100 km.Abbreviations:BET=battery electric truck;FCET=fuel cell electric truck;ICEV=internal combustion engine vehicle;DDC_TRIP=drayage duty cycle(using the trip distance method).Source:WRI authors calculation.VEHICLE DUTY CYCLE CARGO TYPEDAILY VKT(KM)49-t tractor trailer(Tangshan)DDC_TRIPHeavy goods200300400500DDC_DVKT20030040050042-t tractor trailer(Shenzhen)DDC_TRIPLight goods 200300400500DDC_DVKT200300400500BETFCET(H2-only)FCET(hybrid)2022202620242028202320272030Above 203020252029XIVWRITechno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China1INTRODUCTIONAddressing the demand side,particularly cost-conscious and less technology-savvy SMEs concerns,is critical for ZETs future uptake.The study aims to tackle the research questions that what ZET operational feasibility,purchase costs,and TCO challenges are confronted by fleet operators(particularly,SMEs)now;what interventions are effective in overcoming the challenges;and what roles would different interventions play.SECTION 12WRITrucks represented 52,84,and 91 percent of road transport-related CO2,NOx,and PM emissions in China in 2020(Xue and Liu 2022;MEE 2021).Promoting ZETsreferring to battery electric trucks and fuel-cell electric trucksis important to reduce carbon and air pollutant emissions(Xue and Liu 2022).Unlike buses and private cars,the trucking industry in China is dominated by SMEs,including affiliated individuals and self-emp.loyed individuals(TUC 2022a).In 2020,these SMEs represented around 75 percent of Chinas fleet operators,referred to as carriers,own-account third-party logistic providers,and own-account shippers in this study.Seventy-eight percent of these individuals had an annual income at about Chinas average level in 2020(97,379 CNY)(SINOIOV and Changan University 2022).By contrast,the median income for tractor trailer drivers in the United States was US$47,130,38 percent higher than the US average income in 2020(USBLS 2020;USCB 2020).In the past,ZETs in Chinese cities were primarily adopted by large fleet operators that were less cost-sensitive.Now,to further promote ZETs,addressing the demand side,particularly more cost-conscious and less technology-savvy SMEs concerns,is critical for ZETs future uptake.From the demand perspective,small fleet operators are often concerned about the following aspects for ZET transition:(1)whether the operation of ZETs is technologically feasible where range constraints or payload loss can be avoided;(2)whether purchase cost gaps between ZETs and ICEVs are acceptably small;and(3)whether TCO parity with equivalent ICE trucks can be reached(Tol et al.2022).To tackle the previously mentioned concerns,it is important to understand what ZET operational feasibility,purchase costs,and TCO challenges are confronted by fleet operators now;what interventions are effective in overcoming the challenges;and what roles would different interventions play.Policy incentives:Although policy incentives are effective to incentivize ZET adoption,with the complete phase-out of national new energy vehicle(NEV)1 purchase subsidies,China lacks policy incentives to bridge the cost gaps between ZETs and ICEVs.Lingering questions remain as to what policies would be needed to maintain the rapid growth of ZETs.Technology improvements:Current zero-emission technologies encounter technical issues in many use cases,such as high costs,range constraints,payload loss,peak power deficiency,and long downtime due to prolonged charging or maintenance time,compared with their ICEV equivalents(QTLC and MOV3MENT 2022).When and to what degree technological advances would resolve ZETs techno-economic challenges remain unanswered.Business models and operational optimization:Despite current technological challenges and lack of policy incentives,battery swapping and leasing of ZETs have pushed ZET adoption in China(Shen and Mao 2023;Z.Wang et al.2020).For example,the annual sales of battery-swapping heavy-duty trucks(HDTs)in 2022 reached 12,431,higher than battery electric HDTs(Sohu 2023).The Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China3model of battery swapping works because fleet operators only pay for the vehicle body without batteries,and the locations of battery swapping stations are coordinated with truck operation schedules(Ren et al.2024).In the future as technologies develop,whether operational improvements and business models would still be useful would need investigation.Adding to the complexity is the wide variety of truck use cases awaiting ZET transition,and policymakers(and fleet operators)remain unclear about which use-case and zero-emission technology to prioritize.For example,the Shenzhen government offered an 800,000 CNY purchase subsidy per vehicle to facilitate the adoption of 4,200 battery-electric dump trucks in 2019,about one third of the citys dump truck fleet(NEICV 2022).However,the effort was deemed unsuccessful partly due to the high costs associated with battery-electric dump trucks(Pers.Comm.2023a).Now,rather than electrifying the rest of the dump truck fleet,the Shenzhen government has changed the focus to tractor trailers operated in the seaport(Shenzhen MTB 2021).To address the questions raised earlier,this study uses one of Chinas frontrunner regions of ZET transition,Guangdong province,as an example,to tackle the following questions:What are the current challenges with ZET adoption?In the near term,which vehicle segment and use case should be prioritized and at what time?Which zero-emission technology to transition to?What interventions would be helpful to overcome ZETs techno-economic challenges?Would Guangdongs findings be applicable to other Chinese regions?Guangdong has been leading Chinas ZET adoption for years.From 2019 to 2022,its new ZET sales ranked the first among 31 Chinese provinces in China(Niu et al.2023).To reduce the data collection efforts,we chose the cities of Shenzhen and Foshan for in-depth analysis.Among 21 cities in Guangdong,the two cities accounted for 27 percent of the provinces LDT stocks and 30 percent of HDT stocks in 2021(Guangdong Stats 2023).Guangdong also established ambitious goals for ZET transition:Shenzhen aims to reach 80 percent NEVs in new sales of urban delivery LDTs and 100 percent NEVs or clean energy vehicles2 in the fleet of tractor trailers operated in Shenzhen Port by 2025(MIIT et al.2023;Shenzhen MEEB 2022).As the leading city of Guangdong FCEV city cluster,Foshan(and the Guangdong City Cluster)aims to adopt 10,000 FCEVs by 2025(Guangdong DRC et al.2022).Since Guangdong is spearheading ZET transition in emerging use cases,its experiences shed light on the ZET transition in other Chinese regions.This study also examined whether Guangdongs findings would be applicable to other Chinese regions.4WRIBATTERY ELECTRIC DELIVERY VANBATTERY ELECTRIC LDTBATTERY ELECTRIC HDTFC ELECTRIC TRUCKNational incentivesPurchase and ownership tax exemptionZETs are exempted from the purchase tax until the end of 2025 and will receive a 50%tax waiver during 2026 and 2027;ZETs are exempted from ownership tax(MOF,STA,and MIIT 2023,2018)Purchase subsidyXXX3000 CNY/kW based on rated power of FC systems(capped at 110kW)(Guangdong DRC et al.2022)Alternative energy subsidyDemand charges waived for ZETs(State Council 2023)3-12 CNY/kg hydrogen(MOF,MIIT,MOST,NDRC,and NEA 2020)Local incentives:ShenzhenPurchase subsidy (or scrappage scheme)XX50,000-70,000 CNY/vehicle to scrap diesel tractors and replace with ZETs at Shenzhen Port(Shenzhen MTB 2023).Operation subsidyXX5,000 CNY/month for BETs and 3,000 CNY/month for FCETs,for tractor trailers operated in Shenzhen Port(Shenzhen MTB 2023).Alternative energy subsidyXPreferential electricity rates for electrolysis(Shenzhen DRC 2022)Road access privilegeThe city introduced 16 zero-emission freight zones in the city centers that ban the access of diesel LDTs from entering throughout the day.Further,it grants access to new-energy light-and medium-duty trucks to enter some areas within the city but forbids diesel trucks from entering at a particular time of a day(Shenzhen PSB 2022,2023a,2023b,2023c)(see Appendix A).Local incentives:FoshanScrappage schemeXXX30,000-70,000 CNY/vehicle(Foshan Nanhai Government 2021).Operation subsidy0.2-0.4 CNY/km(capped at 30,000 km per year)(Foshan MTB 2022)0.6 CNY/km(capped at 30,000 km per year)(Foshan MTB 2022)X1.5 CNY/km for LDTs(capped at 50,000 km per year)(Foshan MTB 2022)Alternative energy subsidyX18 CNY/kg hydrogen(Foshan Nanhai Government 2022)Road access privilegeThe city introduced four zero-emission freight zones in the city center that ban the access of diesel trucks(some zones also banned diesel HDTs)from entering throughout the day.Further,it grants access to new-energy light-and medium-duty trucks to enter some areas within the city but forbids diesel trucks from entering at a particular time of day.FC LDTs and construction trucks are allowed to enter Nanhai District throughout the day,while the diesel equivalents are banned from access throughout the day(Foshan MEEB and Foshan PSB 2022;Foshan Nanhai Government 2021)(see Appendix A).Table 1|Current policy incentives for ZET adoption at the national level and in Shenzhen and FoshanNotes:The purchase subsidy is the lump sum of national and local purchase subsidies of the Guangdong FCEV City Cluster.X=no policies.Source:WRI authors summary.Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China56WRITechno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China7RESEARCH METHODOLOGYThis section outlines the methods to quantify three decision variables that are important for ZET transition across 14 use cases,including operational feasibility,purchase cost gaps between ZETs and ICEVs,and TCO parity years with ICE trucks.It further elaborates the method to evaluate how different interventionsincluding technological development,policy incentives,operational improvements,and financing mechanisms would affect the three decision variables,particularly in facilitating the achievement of TCO parity years relative to diesel trucks.SECTION 28WRIWe assessed the techno-economic feasibility of ZETs over the time frame of 20222030 across use cases in different MYs for Shenzhen and Foshan.The scope of analysis and the methodology framework are summarized as follows:Time frame:The base year of this study is set to 2022,when the most recent data are available.The MY is set to MY20222030,since we focus on near-term solutions,and near-term projections are relatively more accurate than long-term projections.Alternative fuels or powertrains:Given that limited public resources should be prioritized,only zero-emission and ICE powertrains are considered.Other alternative powertrains,such as plug-in hybrid electric vehicles and natural gas or low-carbon fuel powered internal combustion engines are not covered,due to lack of data or limited applications in Guangdong.Techno-economic analysis:This study focuses on quantifying the decision variables that are important for small fleet operators to support ZET transition,including operational feasibility of ZETs,purchase cost gaps between ZETs and ICEVs,and TCO parity with ICE trucks(Tol et al.2022).Other decision variables that are difficult to quantify,such as vehicle fire safety,are not covered.Following the existing literatures practices(Basma et al.2023;CARB 2019;Hunter et al.2021;Mao et al.2021;Tol et al.2022),the use cases with near-term opportunities for ZET transition are identified,based on ZETs TCO parity years with ICEVs.Further,we evaluate the possible roles played by different interventionsincluding technological development,policy incentives,operational improvements,and financing mechanismsin affecting the previously mentioned decision variables,particularly the roles they played to facilitate the achievement or advances of TCO parity years relative to diesel trucks.Other interventions,such as shippers requirements that are not readily quantifiable and have limited impacts,are not examined.Further,we used an example to illustrate if the conclusions would be applied to other cities and discussed the caveats and uncertainties of the analysis.Data sources:Data used to perform the above analysis include the authors extensive interviews with key local stakeholders in Shenzhen and Foshan(see Appendix B);a literature review of future technology and cost projections,status quo,and best practices on ZET promotion;and a policy document review Figure 1|Relationship among the four types of interventions and fleet operators decision variablesSource:WRI Authors.Operation feasibility(key component sizing)Decision variablesPurchase costsTechnology advancesPolicy incentivesBusiness modelsOperation optimizationTCOTechno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China9of domestic and international policies and mainstreamed ZET make-and-models.The detailed methods and data sources for techno-economic analysis are explained as follows:2.1 Definition of use casesThe techno-economic analysis is performed for each use case.In this study,use cases are characterized by factors relevant to ZETs operational feasibility and cost competitiveness,including vehicle segments,types of goods transported,and duty cycles.We identified prevailing truck use cases in Shenzhen and Foshan,using the following methodsTruck segments:Based on statistical yearbooks,the 2022 Catalogue of New Energy Vehicle Models Exempt from Vehicle Purchase Tax(hereinafter referred to as“NEV Catalogue”)(MIIT 2022),and Pers.Comm.(2023a),the analysis selected truck segments that are common in Shenzhen and Foshan(see Table 2).Truck segments with limited GVW/GCWSHARE OF TRUCK STOCK IN SHENZHEN IN 2022SHARE OF TRUCK STOCK IN FOSHAN IN 2022NUMBER OF ZET MODELS IN 2022 NEV CATALOGUETHIS STUDYMini truckRegular truckGVW1.8t0.2%0.05%X(Few stocks)Refrigerated truckGVW1.8tXLight-duty truckVans1.8tGVW4.5t75x%XRegular truck4.2tGVW4.5t372Refrigerated truck2.2tGVW4.5t47(Few stocks)Dump truck2.2tGVW4.5t1(Few stocks and limited ZET models)Medium-duty truckStraight truck4.5tGVW12t2%4(Few stocks and limited ZET models)Refrigerated truck4.5tGVW12t11Dump truck4.5tGVW20306.0020222022202220222022202220222023202420252026202820302030 20305.752022202220222022202220222023202420252026202820302030 2030 20305.50202220222022202220222023202420252026202820302030 2030 2030 20305.2520222022202220222023202420252026202820302030 2030 2030 2030 20305.002022202220222023202420252026202820302030 2030 2030 2030 2030 20300.40.50.60.70.80.91.01.11.21.31.41.51.61.71.8Electricity price(CNY/kWh)Diesel price(CNY/L)Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China51Figure 19|BETs TCO parity years relative to ICEVs with different diesel prices and charging costs in selected use cases(cont.)b.42-t tractor trailer in DDC_TRIP(daily VKT=400 km)c.18-t straight truck in UD(daily VKT=200 km;light goods transportation)Notes:This study assumes that the useful life of tractor trailers and straight trucks is six years(Pers.Comm.2023a).Green denotes ZETs parity year relative to ICEVs in 2022;yellow and orange in 20232029;and red in 2030 or later.Abbreviations:TCO=total cost of ownership;BET=battery electric truck;ICEV=internal combustion engine vehicle;UD=urban delivery;PO_TRIP=port operation(using the“trip distance”method);DDC_TRIP=drayage duty cycle(using the“trip distance”method).Source:WRI authors calculation.9.002022202220222022202220222022202220222022202220232024202620298.752022202220222022202220222022202220222022202220242025202820308.502022202220222022202220222022202220222022202320252027203020308.2520222022202220222022202220222022202220232024202620282030 20308.0020222022202220222022202220222022202220232025202720302030 20307.75202220222022202220222022202220222023202420262030 2030 2030 20307.50202220222022202220222022202220222024202520282030 2030 2030 20307.25202220222022202220222022202220232024202720302030 2030 2030 20307.0020222022202220222022202220222024202620282030 2030 2030 2030 20306.7520222022202220222022202220232025202720302030 2030 2030 2030 20306.502022202220222022202220232024202620292030 2030 2030 2030 2030 20306.25202220222022202220222023202520282030 2030 2030 2030 2030 2030 20306.00202220222022202220232024202620302030 2030 2030 2030 2030 2030 20305.7520222022202220222024202520282030 2030 2030 2030 2030 2030 2030 20305.502022202220222023202520272030 2030 2030 2030 2030 2030 2030 2030 20305.252022202220222024202620292030 2030 2030 2030 2030 2030 2030 2030 20305.00202220222023202520282030 2030 2030 2030 2030 2030 2030 2030 2030 20300.40.50.60.70.80.91.01.11.21.31.41.51.61.71.8Electricity price(CNY/kWh)9.002022202220222022202220222022202220222022202320242025202620278.752022202220222022202220222022202220222023202320242025202720298.502022202220222022202220222022202220232023202420252026202820308.252022202220222022202220222022202220232024202520262028203020308.0020222022202220222022202220222023202420252026202720292030 20307.752022202220222022202220222023202320242025202720292030 2030 20307.502022202220222022202220232023202420252026202820302030 2030 20307.25202220222022202220222023202420252026202820302030 2030 2030 20307.0020222022202220222023202420242026202720292030 2030 2030 2030 20306.752022202220222023202320242025202720292030 2030 2030 2030 2030 20306.50202220222022202320242025202620282030 2030 2030 2030 2030 2030 20306.25202220222023202420252026202820302030 2030 2030 2030 2030 2030 20306.0020222023202320242026202720302030 2030 2030 2030 2030 2030 2030 20305.752023202320242025202720292030 2030 2030 2030 2030 2030 2030 2030 20305.50202320242025202620282030 2030 2030 2030 2030 2030 2030 2030 2030 20305.25202420252026202820302030 2030 2030 2030 2030 2030 2030 2030 2030 20305.0020242026202720302030 2030 2030 2030 2030 2030 2030 2030 2030 2030 20300.40.50.60.70.80.91.01.11.21.31.41.51.61.71.8Electricity price(CNY/kWh)Diesel price(CNY/L)Diesel price(CNY/L)52WRIFigure 20|FCETs TCO parity years relative to ICEVs with different diesel prices and hydrogen prices in selected use casesa.4.5-t LDT in RD(daily VKT=500 km;heavy goods transportation)b.42-t tractor trailer in RD(daily VKT=500 km)9.002027202820292030203020302030203020308.752027202820292030203020302030203020308.502027202820302030203020302030203020308.252027202920302030203020302030203020308.002028202920302030203020302030203020307.752028202920302030203020302030203020307.502028203020302030203020302030203020307.252029203020302030203020302030203020307.002029203020302030203020302030203020306.752029203020302030203020302030203020306.502030203020302030203020302030203020306.252030203020302030203020302030203020306.002030203020302030203020302030203020305.752030203020302030203020302030203020305.502030203020302030203020302030203020305.252030203020302030203020302030203020305.00203020302030203020302030203020302030202530354045505560Hydrogen price(CNY/kg)9.002024202520272030203020302030203020308.752024202620282030203020302030203020308.502024202620282030203020302030203020308.252025202620292030203020302030203020308.002025202720292030203020302030203020307.752025202720302030203020302030203020307.502026202820302030203020302030203020307.252026202820302030203020302030203020307.002027202920302030203020302030203020306.752027203020302030203020302030203020306.502028203020302030203020302030203020306.252028203020302030203020302030203020306.002029203020302030203020302030203020305.752029203020302030203020302030203020305.502030203020302030203020302030203020305.252030203020302030203020302030203020305.00203020302030203020302030203020302030202530354045505560Hydrogen price(CNY/kg)Diesel price(CNY/L)Diesel price(CNY/L)Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China53Operational optimization and technology leapfrogs are essential for ZETs to achieve TCO parity earlyWithout policy incentives,the driving forces for the decline in TCO could be attributed to operational optimization and technology advances.First,optimization measures taken by fleet operators,including matching BET configurations with charging facility availability and improving operational efficiency,are important for ZETs to reach TCO parity relative to diesel trucks early.Our analysis shows that choosing BETs with smaller batteries,ensuring that charging facilities are sufficiently available,and adjusting operation schedules to allow BETs more than one charge a day are important in reducing BETs TCO.This is especially the case for the PO and DDC use cases.For example,in DDC,if fleet operators choose a 288-kWh MY2025 battery-electric tractor trailer with a 200 km range(BET200)to perform 200500 km daily VKTs,the BET200s vehicle price would be 300,000440,000 CNY lower than the BET400 or BET500s price(with 576720 kWh battery capacities).Therefore,BET200 is likely to reach TCO parity with diesel trucks earlier(parity year=MY20222025)than BET400 or BET500(parity year=after MY2030).In this case,rapid charging at customer locations(or employing the battery-swapping model)is necessary.Although frequent high-power charging of BETs(two to three charges per day)would lead to costly midlife battery replacement and increased energy costs(for BETs to charge at peak hours and higher power rates),these expenses will be offset by cheaper BET prices as a result of small battery capacities(Figure 21).To make this type of operation a reality,it is crucial to have:(1)broad availability of(ultra)-Figure 20|FCETs TCO parity years relative to ICEVs with different diesel prices and hydrogen prices in selected use cases(cont.)c.18-t straight truck in RD(daily VKT=500 km;heavy goods transportation)Notes:This study assumes that the useful life of tractor trailers and straight trucks is six years(Pers.Comm.2023a).The TCO of FCETs reflects the hydrogen-only mode.Unlike the previous analysis,for simplicity of the sensitivity analysis,prices of green hydrogen are fixed throughout the FCETs useful life.Green denotes ZETs parity year relative to ICEVs in 20242026;yellow and orange in 20272029;and red in 2030 or later.Abbreviations:TCO=total cost of ownership;FCET=fuel cell electric truck;ICEV=internal combustion engine vehicle;RD=regional delivery.Source:WRI authors calculation.9.002024202520262028203020302030203020308.752024202520272029203020302030203020308.502024202520272029203020302030203020308.252024202620282030203020302030203020308.002025202620282030203020302030203020307.752025202720292030203020302030203020307.502025202720292030203020302030203020307.252026202720302030203020302030203020307.002026202820302030203020302030203020306.752026202920302030203020302030203020306.502027202920302030203020302030203020306.252027203020302030203020302030203020306.002028203020302030203020302030203020305.752029203020302030203020302030203020305.502029203020302030203020302030203020305.252030203020302030203020302030203020305.00203020302030203020302030203020302030202530354045505560Hydrogen price(CNY/kg)Diesel price(CNY/L)54WRIfast charging facilities,parking spaces,and grid capacities at customer locations(Kotz et al.2022)and(2)BETs operation schedules that allow for sufficient charging time windowsfor example,timing charging with loading(or unloading)of trucks or break times of drivers.The other important operational aspect is operational efficiency improvement.Because BETs energy costs are lower than ICEVs,the longer daily VKTs of BETs,the fewer TCO gaps between BETs and ICEVs.This explains why in DDC_TRIP with a 200-km daily VKT,the TCO of a battery-electric 42-t tractor trailer is still 100,000 CNY and 20,000 CNY higher than the diesel equivalent in MY2025 and MY2030,respectively.Trucks often do not have sufficiently long daily VKTs because of inefficient operation by fleet operators or excessive supply of truck capacity resulting from soft demand or large public subsidies(Pers.Comm.2023a).To enhance vehicle utilization and avoid market oversupply,fleet operators should optimize fleet asset management,route planning,and dispatch operations(Mii et al.2022),while governments should refrain from using large amounts of purchase subsidies to boost ZEV supplies.Second,accelerating technology developments in key ZET components is essential to reduce ZETs TCO and move its parity years to an earlier date.The following analysis shows the modelled percentage reduction in TCO from MY2022 through MY2030 due to technology improvements(Figure 22)with the results as follows:For BETs,the largest TCO reduction comes from:(1)a drop in battery costs;(2)improvements in vehicle energy efficiency(like using more efficient thermal management,active aerodynamic,low rolling resistance tires,and light weighting)(National Petroleum Council 2012;Yang 2018);and(3)the reduction of payload losses from battery energy density improvement,better integration of powertrain components,and the usage of lightweight structural materials(EUCAR 2019).Figure 21|TCO gaps between BETs and ICEVs for 42-t tractor trailers in the DDC_TRIP and DDC_DVKT in MY2025Notes:Abbreviations:TCO=total cost of ownership;BET=battery electric truck;ICEV=internal combustion engine vehicle;DDC_TRIP=drayage duty cycle(using the“trip distance”method);DDC_DVKT=drayage duty cycle(using the“daily VKT”method).Source:WRI authors calculation.(1,000,000)(500,000)0500,0001,000,0001,500,000CNYBET200BET200BET300BET300BET400BET400BET500BET500DDC_DVKTDDC_TRIPVehicleRoad chargePayloadTaxInsuranceFinancingMaintenanceTCO gapEnergyBattery replacementTechno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China55Technology contributors to BETs TCO reduction vary by use case,particularly with the type of cargo transported.For example,for light goods transportation,battery costs and energy efficiency are determining factors,contributing to a 4665 percent and 1842 percent BETs TCO reduction during MY2022 and MY2030,respectively.However,for heavy goods transportation,battery energy density improvement is more significant,responsible for 12 to 78 percent of BETs TCO reduction.Because in the real world small fleet operators transport assorted cargos,battery costs,energy efficiency,and battery energy density all play integral roles when it comes to technology-driven cost reduction.For FCETs,the largest TCO reduction is attributed to the cost reduction of the FC systems and the decline of green hydrogen prices(due to the lower cost of renewable energy and more efficient and cost-effective electrolyzers(IRENA 2020).Technology contributors to FCETs TCO reduction also vary significantly by use case.For UD,fuel cell system cost is the most influential parameter,accounting for 5070 percent of FCETs TCO reduction during MY2022 and MY2030;whereas for RD,hydrogen prices will play a more important role,contributing to 1640 percent of FCETs TCO reduction,and the cost-reduction contribution of hydrogen prices grows as FCETs daily VKTs increase.Figure 22|Contributions of technology improvements to ZET TCO reduction between MY2022 and MY2030 in selected use casesa.BETVEHICLECARGO TYPETECHNOLOGY IMPROVEMENTSUDRDDDC_TRIP200 km300 km300 km500 km200 km500 km4.5-t LDTLight goodsBattery cost(CNY/kWh)46HIQ%N.A.E-drive cost(CNY/kW)17%7%Energy efficiency(kWh/100km)37B%Heavy goodsBattery cost(CNY/kWh)29!%1%N.A.E-drive cost(CNY/kW)10%5%4%0%Energy efficiency(kWh/100km)28# %9ttery energy density(Wh/kg)24Gx%Lightweighting10-t straight truckLight goodsBattery cost(CNY/kWh)56be%N.A.E-drive cost(CNY/kW)22%9%Energy efficiency(kWh/100km)22$&%Heavy goodsBattery cost(CNY/kWh)4296$%N.A.E-drive cost(CNY/kW)14%9%7%3%Energy efficiency(kWh/100km)18ttery energy density(Wh/kg)12 %C%Lightweighting13B-t tractor trailerLight goodsBattery cost(CNY/kWh)54XcSX%E-drive cost(CNY/kW)28 &%Energy efficiency(kWh/100km)18 #%!VWRINote:The text highlighted in blue denotes the technical parameters that are included in“reduction of payload losses.”Abbreviations:BET=battery electric truck;FCET=fuel cell electric truck;ICEV=internal combustion engine vehicle;UD=urban delivery;N.A.=not applicable.Source:WRI authors calculation.Figure 22|Contributions of technology improvements to ZET TCO reduction between MY2022 and MY2030 in selected use cases(cont.)b.FCET VEHICLECARGO TYPETECHNOLOGY IMPROVEMENTSUDRD200 km500 km4.5-t LDTLight goodsFC system cost(CNY/kW)70Q%Hydrogen storage cost(CNY/kg)3%6ttery cost(CNY/kWh)2%1%E-drive cost(CNY/kW)2%2%Energy efficiency(kg/100km)9%Hydrogen fuel price(CNY/kg)14$%Heavy goodsFC system cost(CNY/kW)583%Hydrogen storage cost(CNY/kg)3%4ttery cost(CNY/kWh)2%1%E-drive cost(CNY/kW)2%1%Energy efficiency(kg/100km)10%Hydrogen fuel price(CNY/kg)15%Hydrogen storage gravimetric capacity(wt%)1%4 system specific power(W/kg)1%2ttery energy density(Wh/kg)1%2%Lightweighting7-t straight truckLight goodsFC system cost(CNY/kW)555%Hydrogen storage cost(CNY/kg)5%8ttery cost(CNY/kWh)4%3%E-drive cost(CNY/kW)4%2%Energy efficiency(kg/100km)8%Hydrogen fuel price(CNY/kg)259%Heavy goodsFC system cost(CNY/kW)500%Hydrogen storage cost(CNY/kg)5%7ttery cost(CNY/kWh)4%2%E-drive cost(CNY/kW)3%2%Energy efficiency(kg/100km)8%Hydrogen fuel price(CNY/kg)258%Hydrogen storage gravimetric capacity(wt%)1%2 system specific power(W/kg)0%0ttery energy density(Wh/kg)1%2%Lightweighting3%5B-t tractor trailerLight goodsFC system cost(CNY/kW)533%Hydrogen storage cost(CNY/kg)6%9ttery cost(CNY/kWh)4%2%E-drive cost(CNY/kW)5%3%Energy efficiency(kg/100km)8%Hydrogen fuel price(CNY/kg)25%Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China57BETs TCO parity is likely to be advanced to MY20222025 with a suite of ZET incentives Apart from operation and technology improvements,policy incentives are important to reduce ZETs TCO.Based on literature review(C40 2020;Concept Consulting Group 2022;WEF 2021),this study enumerates policies at the disposal of national and local governments to accelerate the deployment of ZETs,including financial incentives,regulations,and infrastructure safeguards.We choose to focus on eight types of policies the impacts of which on TCO can be quantified under this studys TCO methodology framework.The eight policies were formulated in the China(and Guangdong)s context,with the aim to reduce government expenditure on ZET promotion.The assumptions for the eight policies during 2022 and 2030 are listed as follows:Purchase subsidies:China has phased out NEVs purchase subsidies since 2023 and only offered the FCEV City Cluster subsidies in five city clusters(MOF et al.2020;2021).This study considers no purchase incentives for BETs during 2022 and 2030.Considering that the TCO of FCETs remains high,we assume future Guangdong City Clusters FCEV purchase subsidies will be reduced to 20 percent of the 2022 level during MY2022 and MY2030.Based on the projected power ratings of the FC systems(see the section,“Results from MY2022 to MY2030”),FCETs will receive 50,40090,000 CNY purchase subsidies per vehicle,representing 1122 percent of FCETs purchase costs in MY2030.Tax benefits:At present,diesel trucks in China are subject to a purchase tax(10 percent tax rate)and an ownership tax(tax rates vary by city).However,ZETs are exempted from the purchase tax until the end of 2025 and will receive a 50 percent tax waiver during 2026 and 2027,and the ownership tax will continue to be fully waived(MOF et al.2018;2023).This study assumes that both taxes will be fully waived for ZETs from 2026 onward.Incentives on alternative fuels and charging or refueling infrastructure expansion:Currently,China has waived demand charges for ZET charging and offered various subsidies on energy prices and the construction and operation of charging or refueling infrastructure.For example,Fujian and Jiangsu provinces provided 0.10.3 CNY/kWh subsidies for ZETs that charge on public chargers,and the City of Foshan offers 18 CNY/kg subsidies on hydrogen prices(Changzhou Government 2024;Foshan Nanhai Government 2022;Fujian DRC et al.2022).Henan Province offered grants to cover 40 percent of charging equipment capital investments for public charging stations(Henan Government 2020).This study assumes that in addition to waiving demand charges,local governments will offer 0.1 CNY/kWh incentives on BETs charging.Further,1 to 20 CNY/kg incentives on green hydrogen are also considered in this study to keep the prices of green hydrogen within 30 CNY/kg during 2023 and 2030a target set by the Guangdong FCEV City Cluster(Guangdong DRC et al.2022).Carbon pricing on conventional fuels:At present,China does not have carbon pricing on transportation fuels.In this study,we assume that a carbon tax will be imposed on tailpipe carbon emissions from diesel trucks.The rate is set at the 2022 average price of the Guangdong Emission Trading Scheme(ETS)(80 CNY/ton CO2),17 which is 45 percent higher than the carbon price of Chinas national ETS in 2022(Jinan University 2022).Reduction of expressway road tolls:Distance-based road tolls are common for expressways in China(Guangdong DOT 2020).To incentivize the adoption of ZETs,some regions in China have offered ZETs with reduced toll rates.For example,Gansu Province waived 15 percent tolls for NEVs traveling along expressways within the province;Tianjin went further to exempt 100 percent of road tolls for zero-emission tractor trailers serving Tianjin seaport(i.e.,the DDC use case)(Gansu DOT et al.2021;Tianjin MTC and Tianjin DRC 2021).Considering that road charges are widely used for recovering expressway capital,operation,and maintenance costs in China(Reja et al.2013),this study assumes only a modest 58WRIreduction of 15 percent in expressway tolls for ZETs to ensure sustainable financing of highway operation and maintenance.Road access privilege:To curb traffic congestion,trucks face stringent access restrictions in Chinese cities.For example,in Shenzhen,some expressways ban drayage HDTs,including zero-emission HDTs,from access(see Appendix A).To grant access privilege to ZETs,some cities relax the access restrictions for ZETs while maintaining the restrictions for diesel trucks.This measure would lead to detours of ICE trucks that equate to reduced daily VKTs for ZETs,or longer operating hours and increased earnings for ZETs.To quantify the benefits of the measure,this study takes a simplified approach and only examines the VKTs that were reduced,compared to ICE trucks.Based on our estimation,the relaxation of expressway access for zero-emission drayage trucks in Shenzhen would lead to a 46 percent daily VKT reduction,compared to their diesel counterparts.A 5 percent daily VKT reduction is assumed for the following analysis.ZET weight allowance:The EUs Weights and Dimensions Directive(EU 2019)provides ZETs with an additional weight of 2 tons compared to a reference diesel truck,up to 42-t GVW,and a proposal to grant a 4-ton additional weight allowance is under discussion(Soone 2023).China does not yet have additional weight allowances for ZETs;only a few provinces such as Henan allow trucks,including both ZETs and ICEVs,to be exempt from overloading penalties if exceeding the maximum GVW(or GCW)by 10 percent(Henan Peoples Congress 2023).Here,we assume that the national government will grant an additional 500-kg weight allowance for LDTs and an additional 2-t allowance for HDTs,provided that the increases in ZETs GVW will not exceed the vehicles maximum axle loads.Financing cost reduction:Financing a truck instead of directly purchasing the vehicle is common in China.The loan interest rates vary with the sizes of fleet operators and their creditworthiness.Large fleet operators have lower annual interest rates(around 4 to 7 percent),while small fleet operators and self-employed individual truck drivers would face higher annual interest rates(710 percent)for the three year-loan period(Pers.Comm.2023b).This study assumes that the national government allows small operators to buy ZETs at the loan prime rate of 4.2 percent(Bank of China n.d.),reduced from 10 percent used in the previous analysis.Table 12|Policy incentives to bridge ZETs and ICEVs TCO gaps in Chinas contextMEASURESSELECTED GLOBAL CASESNATIONAL GOVERNMENTLOCAL GOVERNMENTINDUSTRYSupply sideFinancial incentivesZET mandate California:ZEV sales of 40%(tractors),55%(Class 2b-3 truck),75%(Class 4-8 straight trucks),and 100%(drayage trucks)by 2035(CARB 2021b,Advanced Clean Trucks;CARB 2023,Advanced Clean Fleets).EU:100%CO2 emissions reduction for new vans from 2035 onwards(EU 2023b)and proposed targets for new heavy-duty vehicles in 2030(-45%),2035(-65%),and 2040(-90%)(EU 2023a).China:none for truck segments.Research and development EU:Zero Emission Freight EcoSystem in Horizon Europe(ZEFES n.d.).China:National Key R&D Program of China(HTRDC n.d.).Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China59Table 12|Policy incentives to bridge ZETs and ICEVs TCO gaps in Chinas context(cont.)MEASURESSELECTED GLOBAL CASESNATIONAL GOVERNMENTLOCAL GOVERNMENTINDUSTRYDemand sideFinancial incentivesPurchase subsidies(or scrappage scheme)California:up to$200,000 vouchers for terminal tractors(CARB n.d.,Clean Off-Road Equipment Vouchers).Germany:80%of the ZET price difference with diesel counterparts(BALM 2022).China:none,except for FCEV subsidies in five FCEV city clusters(MOF et al.2020;2021).Tax benefits US:clean vehicle tax credit of up to$40,000(USDOT n.d.,Commercial Clean Vehicle Credit).Germany:non-hybrid electric cars exempt from motor vehicle tax(German Bundestag 2012).China:ZEVs are exempted from the purchase tax until the end of 2025 and will receive a 50%tax waiver during 2026 and 2027;ZETs are exempted from vehicle ownership tax(MOF et al.2018;2023).Carbon pricing on conventional fuels California:emission-based credit for transportation fuel(CARB n.d.,Low Carbon Fuel Standard).China:no carbon pricing on conventional fuels.Reduction of expressways tolls Germany:ZEVs exempt from tolls.China:Some regions in China have provided ZETs with 15100%road toll reduction(Gansu DOT et al.2021;Tianjin MTC and Tianjin DRC 2021).Innovative business model Industry:Lease of battery electric trucks in U.S.(Penske 2023)and a pay-per-use model to rent hydrogen fuel cell trucks in Switzerland and Germany(Hyundai n.d.;Shell Corporation 2023).China:The national government rolled out the“NEV Battery Swapping Mode Application and Demonstration”program(MIIT 2021).Operational efficiency improvements Industry:delivery route optimization for lectricit de France(AnyLogic n.d.).Residual value guarantee US:Used clean vehicles can receive 30%of the sale price up to$4,000(USDOT n.d.,Used Clean Vehicle Credit)Industry(China):DST Electric Vehicle Rental provided residual value guarantees for certain ZET models(Evpartner 2023).Financing cost reduction California:Access to low-cost capital through loan loss reserve for small businesses(CARB n.d.,Zero-Emission Truck Loan Pilot Project).60WRIMEASURESSELECTED GLOBAL CASESNATIONAL GOVERNMENTLOCAL GOVERNMENTINDUSTRYDemand sideRegulations Road access privilege US and EU:Zero-emission freight zones were introduced in Los Angeles,Santa Monica,Rotterdam,Amsterdam,Oslo,and other cities(Xue et al.2023).China:Relaxed the road access restrictions for ZETs(Xue et al.2023).ZET weight allowance EU:2 tons additional weight for ZETs(or GCW)(EU 2019)and proposed 4 tons additional weight for long-haul transportation.U.S.:2,000 pounds additional weight(California Constitution 2019).China:None.Infrastructure safeguardsIncentives to alternative fuels and charging/refueling infrastructure expansion US:grants to deploy charging and fueling infrastructure dedicated to heavy-duty ZEVs along highways(FHWA 2024;USEPA 2022).China:Waived demand charges(State Council 2023);purchase and operation subsidies to charging/refueling infrastructure(Henan Government 2020;Otog Government 2023).Distribution and consolidation centers Rotterdam:Optimization of the locations of distribution and consolidation centers to improve operational efficiency and reduce emissions(City of Rotterdam 2020).China:Cities such as Foshan and Suzhou planned new logistic hubs in the city centers to improve logistical efficiency(JLL 2021)Table 12|Policy incentives to bridge ZETs and ICEVs TCO gaps in Chinas context(cont.)The results:Comprehensive policy incentives(that is,the previously mentioned eight policies combined)are more effective in bringing forward ZETs TCO parity years to an earlier date than single measures.These benefits are more significant for BETs.Under the combination of the eight policies,BETs will reach TCO parity with their diesel counterparts in the most-use cases by MY20222025,zero to nine years earlier than the case without policy incentives.By contrast,even with greater amounts of subsidies(particularly the purchase subsidy),FCETs will reach TCO parity with diesel counterparts by MY20222028,three to six years earlier than the case without policy incentives.Overall,with the eight proposed policy incentives,the TCO parity years of BETs are zero to six years earlier than FCETs in most use cases(except for a 4.5-t BET500 LDT when transporting heavy goods),making BETs the most cost competitive ZET option.For example,without policy incentives,the TCO parity point of FC 18-t straight trucks in RD is earlier than the BET equivalent.However,with the comprehensive policy incentives,the TCO parity point of battery electric 18-t straight trucks in RD Notes:The table shows the policy-making jurisdictions in Chinas context.Green indicates that the TCO impacts of the policy incentives were quantitatively evaluated in this study.The letter“”denotes the policy or measure has not yet been taken by relevant stakeholders in China.“”denotes the policy or measure has been taken by relevant stakeholders in China.Sources:WRI authors summary based on C40 2020;Concept Consulting Group 2022;WEF 2021.Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China61is moved to MY20222024,surpassing FC 18-t straight trucks parity point of MY20242027.For BETs,the proposed policies exert varying degrees of impact on BETs TCO parity years across different use cases.Based on this studys policy assumption,BETs benefit most from tax exemption,electricity incentives,road access privileges,reduction of expressway tolls ZET weight allowances,and reductions on financing costs in reducing the TCO parity years.Nonetheless,the improvement in cost parity is not significant when applying the proposed carbon-pricing measure,because of low carbon prices in Guangdong.Six assumed policies are more influential:Tax exemption and electricity incentives for BETs are found to be essential to bridge the TCO gaps between BETs and ICEVs for all use cases.Compared to the case without incentives,BETs TCO parity point will be reduced by zero to three years with tax exemption or electricity incentives.Tax exemption is particularly useful for battery-electric HDTs,such as 18-t straight trucks(in RD light goods transportation),31-t dump trucks,and 42-t tractor trailer(in RD).An approximately 100,000 CNY tax deduction per vehicle is sufficient to bridge the TCO gaps and move the TCO parity point of BETs(MY20262028)two to three years earlier than the case without incentives.Financing cost reductions is particularly effective in reducing TCO parity years in UD,where with the proposed policy,BETs time to TCO parity will be reduced by zero to two years.Road access privileges for BETs are more effective in use cases of long daily VKTs and large shares of operating expenses,such as RD and DDC,because this study assumes that the policy works on VKTs.With road access privileges,the TCO parity years of battery-electric 42-t tractor trailers will be reduced by three years in RD.Reduction of expressway tolls is more influential for 42-t tractor trailers operating in RD and DDC because 42-t tractor trailers in the two use cases have large shares of VKTs on expressways and high toll rates.Road charges represent around 18 to 27 percent of battery-electric 42-t tractor trailers TCO in RD and DDC,making the two use cases most easily affected by the measure of road toll reduction.As a result,the time for battery-electric 42-t tractor trailers to achieve TCO parity is moved zero to four years earlier,compared to the case without incentives.ZET weight allowance is useful for heavy goods transportation,reducing the BETs parity points by zero to four years in these use cases.Although the measure fails to move the TCO parity years of some heavy-goods use cases before MY2030(such as 18-t BET500 straight trucks and 4.5-t BET500 LDTs in RD),it is the most effective approach to TCO reduction for the heavy-goods use cases.For example,with the 2-t weight allowance,the TCO of 18-t BET500 straight trucks will be reduced by about 330,000 CNY,compared with other incentives 40,000 to 110,000 CNY effects on TCO reduction.For FCETs,the proposed policies exert similar impacts on FCETs TCO parity years across all use cases,reducing the FCETs time to reach TCO parity by only zero to one year in most use cases.However,these policies impacts on TCO reduction vary by use case,specifically:Although BETs are cost competitive without purchase subsidies,the proposed FCET purchase subsidy is found to be one of the most influential policy interventions in reducing TCO in all use cases.The measure is particularly effective in UD,where it leads to the largest TCO reduction.However,due to large TCO gaps between FCETs and ICEVs,this policys effect on advancing TCO parity years is limited:FCETs time to TCO parity is only reduced by only zero to two years,achieving TCO parity with the diesel counterparts by MY20262030 for all use cases.The proposed tax exemption and financing cost reductions are particularly effective to bridge the TCO gaps between FCETs and ICEVs in UD,with their effect on TCO reduction only following the purchase subsidy.However,as daily VKTs increase,both policies become less effective.62WRI The proposed road access privilege and road toll reduction measures rise to become the most effective policy in long-distance use cases like RD and DDC in reducing TCO,whereas the ZET weight allowance is useful for heavy goods transportation,particularly in RD.Although in many use cases,the proposed hydrogen fuel incentive fails to move the TCO parity years earlier,it is the most influential policy in TCO reduction in the early years of FCET adoption.Because this study assumes that the hydrogen incentive will keep at-pump green hydrogen prices no greater than 30 CNY/kg,the benefit of the incentive decreases drastically over time.For example,the incentive for an 18-t FCET500 straight truck in RD will drop from about 100,000 CNY in MY2026 to 0 CNY in MY2030,insufficient to bridge the TCO gaps during the time period.On the other hand,in the early years of FCET adoption(during MY20222025),the benefit of the hydrogen fuel incentive is the highest among the eight policies in most use cases(except for 4.5-t LDTs),making the policy most effective in bridging the TCO gaps between FCETs and ICEVs.Like BETs,due to the low carbon price adopted in this study,carbon pricing makes a limited contribution to FCETs TCO reduction.Figure 23|ZET TCO parity relative to ICEVs with policy incentivesa.4.5-t LDTFCET(H2-only)Above 2030Above 2030202720272030203020262026202920292025202520282028202420242023202320222022No policy BETNo policy Policy packageRoad charge reductionRoad access privilege Tax exemptionZET weight allowanceTax exemptionZET weight allowanceRoad charge reductionRoad access privilege Carbon pricingHydrogen subsidy Purchase subsidyFinancing cost reduction Carbon pricingPolicy packageUDRDLight goods-200 kmLight goods-500 kmHeavy goods-200 kmHeavy goods-500 kmCharging subsidyFinancing cost reduction Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China63Figure 23|ZET TCO parity relative to ICEVs with policy incentives(cont.)b.18-t straight truck FCET(H2-only)Above 2030Above 2030202720272030203020262026202920292025202520282028202420242023202320222022No policy BET No policy Policy packageRoad charge reductionRoad access privilege Tax exemptionZET weight allowanceTax exemptionZET weight allowanceRoad charge reductionRoad access privilege Carbon pricingHydrogen subsidy Financing cost reduction Purchase subsidyCarbon pricingPolicy packageUDRDLight goods-200 kmLight goods-500 kmHeavy goods-200 kmHeavy goods-500 kmCharging subsidyFinancing cost reduction 64WRIFigure 23|ZET TCO parity relative to ICEVs with policy incentives(cont.)c.31-t dump truck Above 2030FCET(H2-only)202720302026202920252028202420232022No policy BETNo policy Policy packageRoad charge reductionRoad access privilege Tax exemptionZET weight allowanceTax exemptionZET weight allowanceRoad charge reductionRoad access privilege Carbon pricingHydrogen subsidy Financing cost reduction Purchase subsidyCarbon pricingPolicy packageUDHeavy goods-200 kmHeavy goods-300 kmCharging subsidyFinancing cost reduction Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China65Figure 23|ZET TCO parity relative to ICEVs with policy incentives(cont.)d.42-t tractor trailer Notes:For the 42-t tractor trailer,DDC denotes the DDC_TRIP use cases for BETs and the DDC_DVKT use cases for FCETs.Source:WRI authors calculation.FCET(H2-only)202720272027203020302030Above 2030Above 2030Above 2030202620262026202920292029202520252025202820282028202420242024202320232023202220222022No policy BETNo policy Policy packageRoad charge reductionRoad access privilege Tax exemptionZET weight allowanceTax exemptionZET weight allowanceRoad charge reductionRoad access privilege Charging subsidyFinancing cost reduction Carbon pricingHydrogen subsidy Financing cost reduction Purchase subsidyCarbon pricingPolicy packageDDCUDRDLight goods-200 kmLight goods-200 kmLight goods-500 kmLight goods-500 km66WRI3.3 Applicability to other Chinese cities should be treated with cautionIt is noteworthy that even in the same use case,the vehicle model deployed,the types of goods transported,and driving cycles differ by cities.Therefore,readers should be cautious when applying this studys conclusions to other Chinese cities.Here,we use DDC as an example to illustrate possible regional disparities in ZET configurations and TCO parity years.The reason for choosing DDC is because the previous analysis shows that BETs are likely to reach TCO parity with their diesel counterparts before MY2025 in Shenzhen.The case is different in Tangshan,Hebei Province.Tangshan is another important port city in China,home of the worlds second largest bulk commodity port(Hebei Government 2023).Although Shenzhen Port often employs 42-t tractors trailers for container transportation,Tangshan Port uses 49-t tractor trailers for iron ore and steel products(that are,heavy goods)shipments(Mao et al.2023).Further,because some trucks in Tangshan serve local factories with trip distances within 100km(Mao et al.2023),BET100 would be sufficient to meet daily operational needs,contrary to a BET200 adopted in this study for Shenzhen.Further,because the 49-t tractor trailers in Tangshan have a large proportion of the daily VKTs performed near dock or in the urban environment(Mao et al.2023),their EER(2.8)is higher than it is in Shenzhen in 2022(EER=2.3).This means ZETs are relatively more energy-efficient than their diesel counterparts in Tangshan.Therefore,a 49-t BET100 tractor trailer can reach immediate TCO parity with its diesel counterpart in MY2022 in Tangshan,earlier than in Shenzhen.Even so,the conclusions from the study would be applicable to cities with similar use-case characteristics,including truck segments deployed,types of goods transported,driving cycles,and ambient temperature.Figure 24|ZETs TCO parity years relative to diesel trucks for the DDC use case in Shenzhen and TangshanNotes:This study assumes that the trip distance for Tangshans DDC use case is 100 km,while that for Shenzhen is 200 km.Further,the energy consumption of a MY2022 49-t diesel tractor trailer is 64L/100 km,BET is 230kWh/100 km,and FCET is 18kg/100 km.Abbreviations:BET=battery electric truck;FCET=fuel cell electric truck;ICEV=internal combustion engine vehicle;DDC_TRIP=drayage duty cycle(using the“trip distance”method).Source:WRI authors calculation.BETFCET(H2-only)FCET(hybrid)VEHICLE DUTY CYCLE CARGO TYPEDAILY VKT(KM)49-t tractor trailer(Tangshan)DDC_TRIPHeavy goods200300400500DDC_DVKT20030040050042-t tractor trailer(Shenzhen)DDC_TRIPLight goods 200300400500DDC_DVKT2003004005002022202620242028202320272030Above 203020252029Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China67Although the methodology of this study is universally applicable,this study remains a simplified version of reality with caveats in the research scope and methodology and possible uncertainties in the research conclusions:First,from the demand side,intangible factorssuch as non-cost elements,revenue gains from ZET transition,and the supply-side limitations of ZET manufacturingwould also affect ZET TCO.For example,except for operation feasibility and costs,fleet operators in reality would also take the following factors into consideration:safety and security of ZETs,shippers requirements,market demands and profitability,and customers awareness of the recent development in ZETs when deciding if ZET transition is feasible(QTLC and MOV3MENT 2022).Further,the resilience of the global supply chain for ZET manufacturing and the prices of critical materials would also affect ZETs costs(BNEF 2022).Second,improvements on the TCO analytical framework are needed to capture perceived TCO by small fleet operators and draw more comprehensive recommendations.For example,estimating the costs associated with the downtime incurred by prolonged charging time or maintenance time is useful to inform charging network expansion and after-sale service improvements for ZETs.Evaluating the TCO impacts from a low-temperature or hilly-terrain operation would also be instrumental in expanding the analysiss geographic applicability.Further,taking into consideration the differences in residual values between ZETs and ICEVs will be helpful in improving TCO estimation and develop measures to guarantee ZETs residual values.Third,data are important to improve the TCO estimation and to inform policymaking.Energy efficiency and EER would greatly affect ZETs parity years and use case to prioritize ZET promotion;therefore,it is important to gather ZETs real-world energy efficiency by use case.Further,the mileage profiles of current truck fleets are also critical to the design of broadly applicable ZETs.These areas could serve as future avenues to improve the robustness and applicability of our conclusions.68WRITechno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China69CONCLUSIONS AND RECOMMENDATIONS The results indicate that policy incentives,operational optimization,technology improvements,and financing mechanisms are critical for the future uptake of ZETs in Chinese cities.To accelerate ZET adoption,both private and public entities play important roles.SECTION 470WRIThis study assessed the techno-economic feasibility of ZETs over the time frame of 20222030 across 14 use cases for Shenzhen and Foshan.The results indicate that policy incentives,operational optimization,technology improvements,and financing mechanisms are critical for the future uptake of ZETs in Chinese cities.To accelerate ZET adoption,both private and public entities play important roles:First,without policy incentives,BET promotion in PO,DDC,and UD could be prioritized,given that the TCO parity with diesel trucks in these use cases will be reached as early as MY20222025.To achieve TCO parity,both operational optimization and technology improvements are important:For fleet operators,OEMs,and local governments,choosing BETs with smaller batteries,ensuring that charging facilities are sufficiently available,and adjusting operation schedules(for example,timing charging with loading or unloading of trucks or break times of drivers)are important to reduce BETs TCO.In the near term(up to 2030 in this study),DDC would be an ideal use case for operational optimization because of predictable destinations and operation schedules,return-to-base operation,as well as relatively small geographic coverage relative to RD.Over the long term,with ample charging facilities along the highway network,ZETs in RD would also benefit from operational optimization to reduce TCO.For OEMs and key component manufacturers,accelerating technology developments is essential.Battery cost reduction,vehicle energy efficiency improvement,and battery energy density increases are critical for reducing BETs TCO,while the cost reduction of the fuel cell systems and green hydrogen prices are essential to bring down FCETs TCO.Further,given the day-to-day operation variability of small fleet operators,OEMs should design broadly applicable BETs capable of meeting the majority operation in terms of range.For financial institutions and other private stakeholders,providing new business models(such as leasing and battery swapping)is useful to ease ZETs up-front purchase costs.Second,comprehensive policy incentives are important to close TCO gaps between ZETs and ICEVs.Further,policies are also essential to unlock the potentials of business models and operational optimization.With the comprehensive policies analyzed in this study,the TCO parity years of BETs in most use cases are earlier than FCETs,making BETs the most cost competitive ZET option.ZETs benefit from most measures analyzed in this study,except for carbon pricing.Because the impacts of policies on ZETs TCO parity years and TCO reduction are use-case-specific,comprehensive policy incentives are more effective to bringing forward ZETs TCO parity years to an earlier date than single measures.Subsidies analyzed in this studyincluding purchase subsidies and hydrogen fuel incentivesare one of the most influential policy interventions to bridge FCETs and ICEVs TCO gaps;however,governments should refrain from using large purchase subsidies to boost ZET adoption to avoid flooding the freight market with excessive truck capacity.Because changes in energy prices will greatly affect ZETs parity years with diesel trucks,removal of diesel subsidies(Black et al.2023),carbon taxes on diesel prices(OECD 2022),or alternative energy incentives should be considered to maintain the cost competitiveness of ZETs.Although charging facilities can be delivered by the private sector or through public-private partnerships,public support is essential to enable BETs operational optimization.This public support takes the form of land-use planning,land acquisition,grid capacity expansion,and capital grants or energy incentives to install or operate ultra-fast charging facilities.To guide government investments,fleet operators should provide information on charging hotspots,such as depots and warehouses.Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China71 To foster the proliferation of business models,governments and financial institutions could consider reducing the minimum down payment requirements on ZET loans,unlocking green finance(through reduced interested rates and extended repayment terms)for ZET financing,and providing tax benefits or flexible depreciation for ZET leasing.Data on ZETs energy efficiency and existing diesel truck fleet mileages are important to inform both policymaking and ZETs design.Therefore,it is useful for governments to gather ZETs real-world energy efficiency and ICEVs mileage data by use case and share this information with key stakeholders like OEMs to facilitate ZETs real-world application and technology advances.It is also necessary to go beyond the policies examined in this study to consider other policy options,such as enhancing ZETs fire safety,enforcing air pollution prevention policies,improving ZETs residual values,and organizing public education campaigns,particularly for small fleet operators.Last,the conclusions from the study would be applicable to cities with similar use-case characteristics,including truck segments deployed,types of goods transported,driving cycles,and ambient temperature.City with different characteristics should be cautious when applying this studys conclusions.72WRITechno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China73APPENDICES APPENDIX A.ACCESS PRIVILEGES FOR NEW ENERGY TRUCKS IN SELECTED CITIES IN GUANGDONG Note:a In Foshan,for ICE trucks,medium-duty box trucks with a vehicle length within 6 meters and a GVW within 8 tons have the same access restrictions as light-duty trucks.For new energy trucks registered in Guangdong Province,those with a payload capacity within 5 tons(including light-duty trucks)and medium-duty box trucks with a vehicle length within 6 meters and a GVW within 8 tons are not subject to access restrictions.(Foshan MEEB and Foshan PSB 2022).b In Shenzhen,battery electric medium-and heavy-duty trucks with a vehicle length within 6 meters have the same access restrictions as light-duty ICE trucks.Battery electric medium and heavy-duty trucks with a vehicle length exceeding 6 meters have the same access restrictions as medium-and heavy-duty ICE trucks(Shenzhen PSB 2023a).c In Foshan,among the four zero-emission freight zones,two have restricted the access of medium-and heavy-duty diesel trucks.In Shenzhen,the zero-emission freight zones only restrict the access of light-duty diesel trucks(Shenzhen PSB 2023b).d Access restrictions on non-local trucks are not included in the table.Abbreviations:ICE=internal combustion engine;LDTs=light-duty trucks;MDT=medium-duty trucks;HDTs=heavy-duty trucks;X=no policy.Source:WRI authors summary.FOSHANSHENZHENGUANGZHOUDONGGUANICE truckNew energy truckICE truckNew energy truckICE truckNew energy truckICE truckNew energy truckLDT,certain MDTaMDT&HDTLDT,certain MDTaMDT&HDTLDTMDT&HDTLDTCertainMDT&HDTbMDT&HDTbLDT&MDTHDTLDT&MDTHDTLDTMDT&HDTLDTMDT&HDTZero-emission freight z onescXXXXCity centerCity peripheralTable A-1|Access privileges for new energy trucks in selected cities in Guangdong ProvinceAll-day restriction in all regionsNo restrictionPermits to enter restricted areas are availableAll-day restriction in some regionsDaytime restriction in some regionsPeak-hour restriction in some regions74WRIAPPENDIX B.INTERVIEWS CONDUCTED FOR THIS STUDY We conducted semi-structured online and offline interviews to the following stakeholders.The detailed interview methods are explained in Table B-1.Note:The Authors also managed to include four small fleet operators in the interviews to obtain information about the unique challenges faced by small fleet operators.Source:Authors summary.RESPONDENTS SAMPLING METHODNUMBER OF RESPONDENTSINTERVIEW QUESTIONS Fleet operators of different sizes Convenient sampling by use case 10 operators specialized in 4.5-t LDTs UD and RD operations in Shenzhen and Foshan.7 operators on 42-t tractor trailers DDC in Shenzhen.2 operators for PO in Shenzhen.7 operators specialized in 42-t tractor trailers RD and long-haul operation in Shenzhen and Foshan.5 operators specialized in 18-t straight trucks UD and RD operation in Shenzhen.Typical use cases,status quo on ZET adoption and challenges,energy consumption,purchase costs,TCO(such as maintenance costs)Truck dealersConvenient sampling 3 truck dealers in Shenzhen and Foshan.Energy consumption,purchase costs,TCO(such as loan and insurance costs)OEMs and key component manufacturersConvenient sampling 2 OEMs and key ZET component manufacturers Weights and cost of key components,mainstreamed design of ZETs,TCO(such as replacement costs of key components)Table B-1|Interviews conducted for this studyTechno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China75ABBREVIATIONSBET battery electric truckBEV battery electric vehicleCNY Chinese yuanDDC drayage duty cycleDMC direct manufacturing costEER energy efficiency ratioFC fuel cellFCET fuel cell electric truckFCEV fuel cell electric vehicle HDT heavy-duty truckICEV internal combustion engine vehicleICM indirect cost multiplierGVW gross vehicle weightGCW gross combined weightLDT light-duty truckMY model yearNEV new energy vehiclePO port operationRD regional deliveryTCO total cost of ownership UD urban deliveryVKT vehicle kilometer traveled ZET zero-emission truckENDNOTES1.NEVs include battery electric vehicles(BEVs),plug-in hybrid elec-tric vehicles(PHEVs),and fuel cell electric vehicles(FCEVs).2.Clean-energy vehicles include NEVs and natural gas vehicles.3.Freight density is calculated by dividing the volume by the weight of the cargo.4.This is estimated by assuming that the FCEV uses the hydrogen-only mode.5.C-rate is the rate at which a battery is discharged relative to its maximum capacity.6.How to predict the future capacities of battery packs is explained in the previous section.7.The costs are assumed to be 486 CNY/kW for the OBC and 389 CNY/kW for the DC/DC converter.Further,these costs are assumed to be constant over time.8.Vehicle purchase costs are assumed to be the same in Shenzhen and Foshan.9.BETs often need to be charged over two charges per day,when using the“trip distance”method to size the battery capacities.10.This means the future cost reduction in battery packs are not considered.11.This means that for the case without policy incentives,demand charges are also waived for ZETs.12.The low(green)hydrogen prices can be made possible with low-cost renewable energies(0.13-0.22 CNY/kWh)(Yu et al.2024)and pipeline transportation in 2030.13.Non-native electric vehicles are BETs or FCEVs that use existing platforms from ICEVs;whereas native electric vehicles are BETs or FCEVs that are designed from the ground up.14.The cost is the tractors cost,excluding trailers price.15.Currency exchange rate:1 US dollar=7.0 CNY.16.This study doesnt differentiate FCEVs energy efficiency in UD and RD due to the lack of empirical evidence.17.Guangdong Province is one of seven regional ETS pilots in China;it is characterized by the largest trading volume among all the pilots.76WRIREFERENCESAjanovic,A.,and R.Haas.2018.“Economic Prospects and Policy Framework for Hydrogen as Fuel in the Transport Sector.”Energy Policy 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Government.2022.Interim Measures for Promoting the Development of the Hydrogen Energy Industry in Daxing District(Revised Edition 2022).https:/ August 17,2023.Beijing MEITB(Municipal Bureau of Economy and Information Tech-nology).2022.“Notice on the Implementation of the 2021-2022 Beijing Fuel Cell Vehicle Demonstration and Application Project Applica-tion Process.”https:/ August 17,2023.Berckmans,G.,M.Messagie,J.Smekens,N.Omar,L.Vanhaverbeke,and J.Van Mierlo.2017.“Cost Projection of State of the Art Lithium-Ion Batteries for Electric Vehicles Up to 2030.”Energies 10(9):1314.doi:10.3390/en10091314.Black,S.,A.A.Liu,I.Parry,and N.Vernon.2023.“IMF Fossil Fuel Subsidies Data:2023 Update.”IMF Working Papers 2023(169):1.doi:10.5089/9798400249006.001.BNEF(BloombergNEF).2022.“Lithium-Ion Battery Pack Prices Rise for First Time to an Average of$151/kWh.”Blog.December 6.https:/ Hydrogen Levelized Cost Update:Green Beats Gray.”Blog.July 25.https:/ A.K.Sinha.2020.Technology,Sustainability,and Market-ing of Battery Electric and Hydrogen Fuel Cell Medium-Duty and Heavy-Duty Trucks and Buses in 20202040.Davis,CA;UC Davis.doi:10.7922/G2H993FJ.Burnham,A.,D.Gohlke,L.Rush,T.Stephens,Y.Zhou,M.Delucchi,A.Birky,et al.2021.Comprehensive Total Cost of Ownership Quantification for Vehicles with Different Size Classes and Powertrains.Lemont,IL:Argonne National Laboratory.doi:10.2172/1780970.C40.2020.“Zero-Emission Freight:Vehicle Market and Policy Develop-ment Briefing for C40 Cities.”https:/www.c40knowledgehub.org/s/article/Zero-emission-freight-Vehicle-market-and-policy-develop-ment-briefing-for-C40-cities?language=en_US.Accessed August 17,2023.CALB(China Aviation Lithium Battery Technology).2022.CALB Global Offering.https:/invest.calb- Air Resources Board).2018.Battery Electric Truck and Bus Energy Efficiency Compared to Conventional Die-sel Vehicles.https:/ww2.arb.ca.gov/sites/default/files/2018-11/180124hdbevefficiency.pdf.CARB.2019.“Advanced Clean Trucks Total Cost of Ownership Discus-sion Document.”https:/ww2.arb.ca.gov/sites/default/files/2020-06/190225tco_ADA.pdf.CARB.2021a.“Draft Advanced Clean Fleets Total Cost of Ownership Discussion Document.”2021.https:/ww2.arb.ca.gov/sites/default/files/2021-08/210909costdoc_ADA.pdf.CARB.2021b.“Advanced Clean Trucks.”https:/ww2.arb.ca.gov/our-work/programs/advanced-clean-trucks.Accessed January 18,2024.CARB.2023.“Advanced Clean Fleets RegulationDrayage Truck Requirements.”https:/ww2.arb.ca.gov/resources/fact-sheets/advanced-clean-fleets-regulation-drayage-truck-requirements.Ac-cessed January 18,2024.CARB.n.d.“Clean Off-Road Equipment Vouchers.”https:/ww2.arb.ca.gov/our-work/programs/clean-off-road-equipment-voucher-incen-tive-project.Accessed January 18,2024.Techno-economic feasibility analysis of zero-emission trucks in urban and regional delivery use cases:a case study of Guangdong Province,China77CARB.n.d.“Low Carbon Fuel Standard.”https:/ww2.arb.ca.gov/our-work/programs/low-carbon-fuel-standard.Accessed January 17,2024.CARB.n.d.“Zero-Emission Truck Loan Pilot Project|California Air Resources Board.”https:/ww2.arb.ca.gov/our-work/programs/zero-emission-truck-loan-pilot/about.Accessed December 14,2023.California Constitution.2019.“Vehicle Code-VEH.”2019.https:/leginfo.legislature.ca.gov/faces/codesTOCSelected.xhtml?tocCode=VEH&tocTitle= Vehicle Code - VEH.Accessed August 18,2023.CATARC(China Automotive Technology and Research Center).2017.Assessment of Freight System in China.https:/theicct.org/wp-content/uploads/2022/01/中国货体系评估项目报告-2017.11.9.pdf.CATARC.2022.Research on TCO of Commercial Vehicles in China and Comparison between China and US.https:/www.efchina.org/Reports-zh/report-ctp-20220701-zh.Accessed February 1,2024.CFLP(China Federation of Logistics and Purchasing).2022.Report on the Small-and Medium-Sized Logistics Enterprises.http:/ Febru-ary 1,2024.Changzhou Government.2024.“Changzhou City Implements Subsidies for New Energy Vehicle Charging Services.”https:/ February 1,2024.Chen,Y.,and M.Melaina.2019.“Model-Based Techno-Economic Evaluation of Fuel Cell Vehicles Considering Technology Uncertain-ties.”Transportation Research Part D:Transport and Environment 74(September):23444.doi:10.1016/j.trd.2019.08.002.Cheng,Q.,R.Zhang,Z.Shi,and J.Lin.2024.“Review of Common Hydrogen Storage Tanks and Current Manufacturing Methods for Aluminium Alloy Tank Liners.”International Journal of Lightweight Ma-terials and Manufacture 7(2):26984.doi:10.1016/j.ijlmm.2023.08.002.China SAE(China Society of Automotive Engineers).2021.Technology Roadmap for Energy Saving and New Energy Vehicles 2.0.Beijing,China:China Machine Press.China SAE.2024.Technology Roa
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Automotive IQ All Rights Reserved|1 INDUSTRY REPORT STATE OF THE MARKET 2024:AUTOMOTIVE THERMAL MANAGEMENTUncover the vehicle manufacturers greatest challenges,learning priorities and goals Automotive IQ All Rights Reserved|2TABLE OF CONTENTSI FOREWORD FROM THE EDITOR 3I SURVEY&REPORT METHODOLOGY 4I EXECUTIVE SUMMARY 5I WELL-PLANNED EV THERMAL MANAGEMENT GOALS UNLOCK COUNTLESS OPPORTUNITIES 7I THERMAL MANAGEMENT CHALLENGES 10I THERMAL MANAGEMENT SOLUTIONS 14I CONCLUSION 16 Automotive IQ All Rights Reserved|3021461048121618Despite several years of near-exponential growth,electric vehicle(EV)sales are showing signs of slowing.In America,progress is expected to slow from the 40 percent experienced in 2023 which was already lower than that seen in the preceding two years to about 20 percent in 2024.iFOREWORD FROM THE EDITORImage Source:IEA2012201620202014201820222013201720212015201920232024 China Europe United States Rest of the world“The big issue on everybodys mind is thermal management”Bob Corbishley,Senior Principal Engineer,Mahle PowertrainEven though a slowdown was inevitable,many industry observers attribute the severity,in part,to unaddressed consumer concerns such as limited range,lengthy charging times,high initial purchase price,and persistent safety concerns.While manufacturers have made significant advances in battery technologies,powertrain efficiencies,and weight reduction,more needs to be done.To sustain a“second wave”ii of growth particularly in battery electric vehicles(BEVs),hybrids(HEVs),and plugin hybrids(PHEVs)manufacturers are working to address potential owners continued reservations regarding EV ownership.However,in allaying these concerns,as battery energy densities and charge rates increase,and electric motors become more powerful,efficient,and cost-effective management of the additional heat generated by these electric powertrains will be crucial.And with legacy OEMs increasing PHEV and HEV offerings to boost EV sales and reduce fleet emissions,the thermal management of these hybrid powertrains brings with it a unique set of challenges.Thus,in keeping with the industrys consensus view of the challenges facing electrified powertrains,managing the thermal performance of batteries emerged as a top concern in a survey conducted during Automotive IQs Thermal Management for EV/HEV 2024 event held in Munich,Germany.During the event,held in March 2024,delegates were also asked to share their views on the most pressing thermal management challenges they face,as well as their areas of focus over the ensuing 12 to 24 months.This report will analyze the data collected and detail the current opportunities,challenges and solutions for the thermal management space in 2024.Steven Wicks Editor,Automotive IQ Automotive IQ All Rights Reserved|4SURVEY&REPORT METHODOLOGYLeading thermal management experts representing a cross-section of global OEMs,Tier-1,and Tier-2 suppliers were asked to take part in a survey,to share their insights in key areas affecting thermal management as it relates to EVs,HEVs and PHEVs.We have categorized and analyzed the data collected through this process to gain a deeper understanding of the thermal management landscape impacting the industry.From this,we have summarized the pain points,challenges,and opportunities effective thermal management presents manufacturers.In addition to primary research and the Thermal Management Survey,Automotive IQ has studied information acquired from publicly accessible sources and analyzed various secondary research materials,including press releases,industry publications,and industry reports.While every effort has been made to reference quotes from primary research,some of this information has been anonymized.For transparency,data from secondary sources are reinforced with references.The results from the survey,describe the state of the industry,highlighting current pain points and key challenges,and potential solutions and opportunities,driving the growth of this sector.As such,the report showcases the challenges facing the industry in 2024,and what opportunities technological advances in fields such as battery thermal management and AI-based control strategies present.Automotive IQ All Rights Reserved|5EXECUTIVE SUMMARYElectric vehicles generate significant amounts of heat,which,if left unchecked,increases safety risks,reduces battery lifespan,and limits both charging times and vehicle performance.As a result,it is important that through effective thermal management the electric motor,power electronics,and battery are cost-effectively maintained at their respective optimum operating temperatures while ensuring passenger comfort in the cabin.However,the markets rapid growth and lack of a one-size-fits-all technology has the automotive industry stepping up its search for innovative and effective thermal management solutions to unwanted temperature extremes.Image Source:MarketQuest.biz64%of respondents see battery thermal management as the greatest challengefaced by their organization right now Automotive IQ All Rights Reserved|6“The automotive thermal systems market was valued at USD 102.2 Billion in 2023 and is expected to reach a market size of USD 175.4 Billion by 2032 at a CAGR of 6.2%.”DataHorizzon Research iii94%of automotive professionalsattending the event believe Thermal Management is a high-growth area,with lots of innovation taking place Automotive IQ All Rights Reserved|7WELL-PLANNED EV THERMAL MANAGEMENT GOALS UNLOCK COUNTLESS OPPORTUNITIESContrary to popular belief,the thermal management of EV systems is no simpler than the management of heat generated in an ICE-powered vehicle.In fact,due to the interdependent nature of systems such as motor,battery,and cabin temperature control,the solutions are often more complex.With this complexity comes opportunities for organizations that are able to implement innovative,cost-effective solutions.The greatest of these opportunities presented by thermal management lies with implementing rapidly developing technologies to come up with integrated solutions that enhance the performance and reduce the costs of the EV.Through an integrated approach to cabin thermal management(CTM),battery thermal management(BTM),and motor thermal management(MTM),the all-electric range can be extended by up to 30 percent,especially when operating in winter.vii Moreover an improvement in thermal performance,also allows the electric motor to deliver higher continuous output,the power electronics to perform more efficiently,and the battery to charge faster.All of this while modulating cabin temperature to enhance passenger comfort.Meeting these wide-ranging challenges,however,requires innovative solutions.The rapid advances in artificial intelligence(AI)offer organizations that embrace the technology the opportunity to resolve complex problems that would normally take years of development using traditional engineering methodology.“It is often assumed that thermal management will be easier for electric powertrains than for ICE,but thats not the case.First-generation systems are certainly simpler,but doing it well to increase power density and take advantage of opportunities for high levels of integration will be much harder.”Prof Sam Akenhurst,Deputy Academic Director,Institute for Advanced Automotive Propulsion Systems29%From this list,which topic ranks highest on your list of learning priorities?of survey participants expressed an interest in using AI Control Strategies 18%New Refrigerants 18%AI for Thermal Management 29%Fuel Cell 12st Charging Thermal Management 24%Automotive IQ All Rights Reserved|8Even though simulation has been used in the automotive industry for many years,this is not easily replicated in battery pack design.Obtaining the necessary data for accurate battery simulation is difficult,requiring extensive testing over months or even years to understand the characteristics of cells.This information is critical to determining the thermal and electrical properties of the battery under various conditions.This is where virtual tools underpinned by machine learning and AI are playing an increasingly pivotal role in fast-tracking battery development.Supported by advanced modelling and data analytics,these digital tools unlock major time and cost savings while enhancing the quality and accuracy of predictive forecasting.viiiThis not only enhances the reliability of the various systems but also allows for higher power densities,and faster charging of the batteries as thermal limitations can be mitigated with intelligent control.vAnother technology offering the industry an opportunity to significantly improve EV thermal management even after the vehicle has left the production line-is the widespread adoption of connectivity.AI-driven solutions are wide-ranging.From design,where,by leveraging AI algorithms engineers can analyze complex thermal characteristics-taking into account factors such as heat dissipation,component placement,cooling methods,and airflow dynamics-to predict temperature profiles,thereby optimizing cooling strategies.ivTesting and modelling the entire powertrain as a system,rather than at a component level,is key to achieving the desired efficiency gains.47%of survey respondents have the objective of managing thermal management not only on a component basis,but on a system/complete vehicle level Automotive IQ All Rights Reserved|9Image Source:Battery DesignOver-the-air(OTA)updates can help manage thermal performance,providing system updates to improve efficiency.Improvements delivered by OTA updates are derived from in-service data and ongoing engineering development.With onboard sensors already collecting most of the data needed to optimize component and system calibrations,connectivity allows customized real-time performance updates to be sent to the fleet.ixFor instance,there is a great opportunity to improve efficiency by adjusting motor and control parameters based on data gathered from the fleet.Using this data,inverter switching frequency strategies can be modified to suit the duty cycle as dictated by real-world driving conditions.While effective thermal management holds significant opportunities for drivers and manufacturers,the industry nevertheless faces several challenges in design and implementation with uncertain regulatory and business conditions adding to the complexity.Automotive IQ All Rights Reserved|10THERMAL MANAGEMENT CHALLENGESThe fundamental problem manufacturers face with managing temperature across all the systems in the EV is the large differential in ideal operating temperatures of the various loops,as well as the differences in the amount of heat to be removed from the various components.Thus,with an inverter typically operating in a range of between-105F and 185F,and the Li-ion battery best at around 70F,a cost-effective,a light weight common cooling circuit is difficult to engineer.This complexity is further exacerbated in ICE-Electric hybrid powertrains with dual energy sources requiring different control strategies.During operation,the drive mode over any given route has a significant impact on the overall vehicle efficiency highlighting the need for effective control strategies.Thus,several studies have been conducted on PHEV drive-control strategies such as Charge Depletion Charge Sustaining(CDCS)and blend mode control approaches.However,none of these strategies simultaneously seek to optimize vehicle performance and battery longevity.Simulation shows that by balancing the ICE and electric modes of operation,while also taking the condition of the battery into consideration,can significantly reduce battery degradation compared to other controllers designed to optimize energy resources only.Results show the strategy,which includes thermal management of the battery,reduces battery degradation by 12 percent over that of the CDCS approach,while maintaining 17.5 percent more battery capacity than that of other controllers at the end of the test.With total cost of ownership high on the list of consumers priorities,this increase in battery life is significant.XX47%of survey respondents aim to find the optimum balance between passenger comfort,vehicle range,and thermal management Automotive IQ All Rights Reserved|11As can be expected,with the battery being the most sensitive link in the thermal management chain,as indicated by Automotive IQs survey,much of the industrys focus is on managing the temperature of the battery pack.Thermal management of the battery is particularly important when fast-charging(or discharging)the battery-often at rates exceeding 4C.While the drive for a 10-minute fast charge to reach an 80 percent state of charge and higher energy density is crucial to easing consumer anxieties around time to charge,range,cost,and safety,managing the temperatures generated by these packs is crucial.Image Source:DataDive Market ResearchImage Source:StanfordTemperature(K)Route:Urban First,Speed:Med Cruise Total Battery Used(J)Total Fuel Used(J)300 x107x1075.01.705.41.905.31.855.21.805.11.75305310315320 Automotive IQ All Rights Reserved|12The greatest challenge to extreme fast charging with Level 3 DC chargers capable of delivering over 250 kW of power is managing the temperature of the power cable,connector,and battery pack.To protect the battery several manufacturers apply“Stepped Fast Charging”(SFC)-an innovative charging approach that optimizes the charging process by adjusting the charging rate in distinct steps.This staged approach helps mitigate overheating risks,during rapid charging,thereby ensuring sustained battery performance over time.The Battery Management System(BMS)continuously monitors and adjusts charging parameters,preventing potential damage and optimizing the balance between rapid charging and battery longevity.xiiThis data-driven thermal management strategy,when coupled with AI and machine learning,ensures efficient and sustainable fast-charging practices that can be customized to specific real-world use cases.This ensures the critical balance between speed and battery health in the realm of electric vehicle charging is maintained at all times.Managing the temperature of the battery is not only about optimizing charging performance and longevity,safety is a critical consideration-an overheating battery is prone to thermal runaway,which can rapidly lead to a battery fire.But even if this catastrophic situation does not occur,prolonged exposure to high temperatures during operation will increase internal resistance and accelerate degradation.Battery packs that operate at elevated temperatures for extended periods tend to age more quickly,leading to compromised range,power,and overall performance.The degradation rate of maximum charge storage after 260 cycles increases from 4.22 to 13.24 percent if the operating temperature increases from 77 to 131F.xvWhile thermal management is often perceived as controlling excessively high temperatures,for the battery,extremely low temperatures can lead to lithium plating(metallic lithium deposits on the anode surface),which also adversely affects battery life and performance.x24%From this list,which topic ranks highest on your list of learning priorities?of delegates rank fast-charging thermal management highest on their list of learning prioritiesControl Strategies 18%New Refrigerants 18%AI for Thermal Management 29%Fuel Cell 12st Charging Thermal Management 24%Automotive IQ All Rights Reserved|13Even though the battery,because of its critical role in the electric powertrain,receives most of the attention,effective thermal management is equally important in extracting peak performance from other systems.For motors and power electronics,the main challenge is ensuring that the sensitive electrical components operate within their intended temperature range.Modern high performance electric motors are temperature sensitive,often delivering their best efficiencies when liquid-cooled.This results in a constant trade-off between a lighter-weight air-cooled motor and the bulkier yet more efficient liquid-cooled solution.Thus,while thermal management holds significant opportunities for the industry these are accompanied by several challenges.Image Source:Battery DesignDifferent Temperature Discharge Curve 0.5CCapacity(%rated)Voltage(V)50C 40C 30C 20C 10C 0C-10C010.010.511.011.512.012.513.513.0100705020309080604010 Automotive IQ All Rights Reserved|14THERMAL MANAGEMENT SOLUTIONSParticularly susceptible to elevated temperatures,permanent magnet motors need to operate in a tightly managed thermal window.One of the many reasons the industry is looking into magnet-free motors and material substitutions such as replacing copper with aluminum.While the resistivity of aluminum is higher,the additional surface area makes it easier to remove heat.In MGUs(motor generator units),the challenge is to design a cooling system that protects difficult-to-reach areas of windings to ensure they do not overheat,which could lead to premature failure.xivWhilst there are four major thermal management techniques currently being applied-air cooling,liquid cooling(including di-electric and phase-change materials),and hybrid methods liquid cooling exhibits superior heat dissipation capabilities.The introduction of liquid-cooling initially water-glycol and more recently dielectric fluids has greatly improved the heat dissipation and thermal management of the electric powertrain and battery pack.Immersion cooling with a dielectric fluid has the potential to increase the rate of heat transfer by 10,000 times relative to passive air cooling.xvii“Now,most cooling packages are focused on water-glycol indirect cooling.We are approaching the limits of indirect cooling as evidenced by how intricate the cooling plates are becoming.”Andy Richenderfer,Senior Research Engineer at the Lubrizol Corporation18%of respondents place an emphasis on learning about new refrigerants Automotive IQ All Rights Reserved|15Although relatively new,immersion cooling technologies using phase-change materials(PCMs),where heat transfer causes the fluid to boil and turn into vapor,which then rises and condenses on a heat exchanger,are attracting a lot of attention as a future trend for effective thermal management.The recent development of a new heat-transfer fluid based on hydrofluoroolefin dielectric fluid,with a normal boiling point of 120 F,not only offers improved heat transfer but also reduces the environmental impact often associated with refrigerants.xiThe low boiling point of these liquids is particularly helpful in stabilizing the temperatures of critical EV powertrain components such as batteries,motors,and power electronics.The heat generated by the components in these systems can easily induce a phase change where the liquid surrounding the components boils and generates vapor,which in turn goes through a phase change returning it to a liquid state while removing the heat.This characteristic has drawn the attention of a major North American OEM who has filed for a patent using PCM to cool the charging port.Even though charging cables with current capacities allowing continuous charging at 500A,are available,a means of effectively controlling the temperature of the charging port has remained elusive.In the application published by the United States Patent and Trademark Office in April 2024,PCM would be placed around the charge port allowing heat to be removed as the material shifts from a solid to a liquid state as it absorbs the heat generated by the flow of electricity through the port.xviWith highly integrated,next-generation thermal management systems expected to provide flexibility and more competitive cost points,thermal management systems will be increasingly integrated,with components able to realize multiple functions,even integrating parts of different circuits,such as the coolant loop and the refrigerant loop.This is likely to be achieved with the aid of wax-type thermostats to implement thermal management across various systems possibly with the exception of the temperature management of the current generation of batteries.ixWith machine learning already being put to work in a wide range of automotive applications it could likely be used in future thermal management control strategies for EVs utilizing a Soft Actor-Critic(SAC)algorithm-a form of deep reinforcement learning.A controller based on the SAC algorithm would enhance battery performance safety and cabin comfort while optimizing energy efficiency.Simulation experiments have demonstrated the effectiveness of this control strategy in outperforming rule-based controllers.xix Automotive IQ All Rights Reserved|16These non-technical challenges are possibly even more difficult to resolve than those presented by the rapidly evolving technology landscape.For instance:With many of the compounds used in the thermal management of the various systems in the typical EV relying heavily on fluorinated chemistry,pending legislation in the EU,and more recently the US,could have wide-ranging consequences.The EUs draft restriction proposal for per-and poly-fluoroalkyl substances(PFAS),which represent thousands of diverse fluorinated chemicals,is the broadest chemical restriction proposal in the history of the EU and does not consider the vastly different profiles of chemistries included in its scope.If the proposal were adopted as is,it would have major consequences on the automotive sector,where fluorinated chemistries are vital to everything from EV battery production,faster charging,increased range size,heating,and cooling,to sourcing,supply chains,distribution and logistics.xiiiTo add to the uncertainty,OEMs also need to contend with heightened global tensions and competition from Chinese imports.With Chinese EVs selling for as little as$11,000 in some countries,Western manufacturers are under pressure to curtail costs from design to R&D,manufacture,and supply chain.All of this in a low-growth market.Thus,it is imperative for North American vehicle manufacturers,and Tier-1 and Tier-2 suppliers to achieve a thermal system design that is cost-effective and delivers a high level of performance,safety,and range,whilst offering passengers unbridled comfort.CONCLUSIONWhereas thermal management was a secondary concern for ICE powertrains,it is at the forefront for EVs.Keeping components cool and within their operating temperature window is now the primary hurdle to vehicle performance metrics such as charging speed and driving range(via motor efficiency).With current Li-ion batteries happiest in a relatively narrow temperature range,OEMs also need to ensure that EVs operate at their peak across a wide range of ambient temperatures.This is important for charging,range,and the comfort of passengers.Whether vehicles are fully electric or hybrid,thermal management systems remain an important part of the vehicles functionality.And with manufacturers adding more features requiring electrical power and generating unwanted heat thermal management of the various loops is becoming more challenging.At the same time,an evolving EV echo system makes it difficult for manufacturers to plan with certainty.Industry professionals attending Automotive IQs“Thermal Management for EV/HEV 2024”event voiced their concerns that the greatest challenge in the next 12-24 months may well be greater than the technological challenges:What is going to be the industrys biggest challenge in the next 12-24 months?t Surviving in stagnating marketst Gigafactory construction t Uncertainties regarding PFAS regulation.t Continued investment in EV technology due to the decrease in sales t New innovative competitors Automotive IQ All Rights Reserved|17Sources:i IEA,2024;Global EV Outlook 2024;https:/www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-carsii WardsAuto Podcast,2024;What Will Move EV Fence Sitters;https:/ iii DataHorizzon Research,2024;Automotive Thermal Systems Market To Reach USD 175.4 Billion By 2032,Says DataHorizzon Research;https:/ iv Jatin Khera,2024;How Artificial Intelligence Transforms Electric Vehicle Power Electronics;https:/ Deacon Herald,2024;How data analytics and AI are critical to EV charging anxiety;https:/ vi Cadence Systems,2024;The Importance of Thermal Management in Electric Vehicles;https:/resources.system- vii GreenCars,2023;New Thermal Management Tech Could Extend EV Range in Winter;https:/ Automotive Powertrain technology international,2024;Battery innovation Why virtual testing is the future;https:/ ix Automotive Powertrain technology international,2024;BEV focus;September publication x Battery Design,2024;Cold Temperature Charge/Discharge;https:/ EV engineering&Infrastructure,2024;New two-phase immersion cooling technology for EVs;https:/ Battery Design,2023;Stepped Fast Charge Limits;https:/ Automotive News Europe,2023;The EU could ban the very chemistry it needs to electrify cars;https:/ xiv Automotive Powertrain technology international,2024;BEV focus;September publication xv Nature,Scientific report;Effect of Temperature on the Aging rate of Li Ion Battery Operating above Room Temperature;https:/ Green Car Reports,2024;GM might cool EV charge ports like microchips;https:/ ScienceDirect,Journal of Power Sources,2022;Immersion cooling for lithium-ion batteries A review;https:/ xviii The American Prospect,2024;The Chinese Auto Conundrum;https:/prospect.org/economy/2024-03-04-byd-china-ev-imports-cheap/xix SSRN,2023;Research on the Thermal Management Control Strategy of Electric Vehicles Based on the Soft Actor-Critic Algorithm;https:/ xx Stanford University,2020;Optimal Operation of a Plug-in Hybrid Vehicle with Battery Thermal and Degradation Model;https:/web.stanford.edu/boyd/papers/pdf/hybrid_thermal_degr_acc.pdf
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European Rail Supply IndustryA N N U A L R E P O R T 2 0 2 4UNIFE-The European Rail Supply Industry AssociationAvenue Louise 221,Brussels,Belgium,B-1050 32 2 626 12 60generalunife.orgUNIFEUNIFE_RailMessage from UNIFE Director General4Message from UNIFE Chair201.UNIFE in 2024802.European Affairs2003.International Affairs42Table of Contents12.UNIFE Staff13805.Standards and Regulation5806.Research and Innovation activities7607.Signalling and ERTMS8809.IRIS-International Railway Industry Standard10810.Communications11611.UNIFE Members in 202412604.UNIFE World Rail Market Study 20245410208.ERWA-UNIFE Railway Wheels CommitteeTable of Contents1 Message from Michael Peter,UNIFE Chair2024 was a year of change and a year of great progress for the rail industry.We continued driving innovation and reinforcing our vital role in building a sustainable and connected future.Unfortunately,it was another year characterized by the visible effects of climate change,further underlining the importance of our work,and the need to accelerate technology deployment.Firstly,I would like to extend my sincere gratitude to the UNIFE Director General,UNIFE secretariat,UNIFE members,and the entire rail community for the collective effort and dedication that shaped this year.We had important changes within UNIFE,welcoming our new Director General Enno Wiebe in June.Enno embraced the role quickly leading the association through challenging times and paving the way towards transformation.We said farewell to a great supporter and true enthusiast for our sector,Josef Doppelbauer who left his role as Executive Director of the European Union Agency for Railways after 10 years of dedicated work.2024 brought external changes marked by geopolitical events including elections in the EU.We saw a year of fundamental shifts in well-established industrial sectors,like automotive,and fast advancements in key technologies like Artificial Intelligence(AI).And we witnessed devastating floodings in Spain and Central Europe in 2024,and more recently destructive wildfires in California.These climate-related events are becoming much more frequent,emphasizing the evident and urgent need for decarbonization and climate resilience.It has never been a more important time for us as an industry.The transport sector accounts for 1/5 of CO2 emissions,which is why rail as the most sustainable mode of transport must be top of an agenda of change.2UNIFE Annual Report 2024And we are ready.In 2024 the EU rail supply industry has shown again that it is well positioned in Europe and the world,to strive and accelerate the green mobility transition.Decarbonization is a major driver for our market with governments investing heavily.This was highlighted in the UNIFE World Rail Market Study(WRMS)which forecasts solid growth for the next five years with an overall growth prediction of 3%.We can be proud that seemingly the whole world was watching as our industry presented its potential at a record-breaking InnoTrans 2024.With 170,000 visitors from 133 countries,innovation was alive on every corner of over 200,000m2 of exhibition space in Berlin.The decarbonization and digitalization agenda was advanced greatly at a hugely impressive and impactful event.Electrification remains the key driver for decarbonization,however important advances were made with battery and hydrogen trains particularly to reach more remote lines.On a personal level,I am particularly excited about how our sector is leveraging the benefits of AI,for instance via analysis and assessment tools for predictive maintenance and their enablement with strong cybersecurity foundations.InnoTrans 2024 showed that we are certainly on the right track,and it served as a reminder that we need to further accelerate in specific areas.A key challenge is to expedite the implementation of(new)technologies to help make rail even more attractive.One example is ERTMS that can serve as a building block for seamless rail traffic across Europe.Here,we need to accelerate national rollouts to enable the earlier phase out of Class B systems.Another example is FRMCS(Future Railway Mobile Communication System)where we need to ensure a smooth transition from the current GSM-R telecommunications system.With the support of the European Institutions,we can achieve these goals by:Ensuring strong European funding for rail under the next Multiannual Financial Framework(2028-2034)Promoting regulatory stability Reducing administrative burdensIn summary,we can be proud of all we achieved in 2024.Our collaborative efforts and the continued dedication from the UNIFE secretariat have certainly advanced our progress.2025 will be a pivotal phase as we establish continuity and growth with the new EU Commission in place.Our priorities remain clear,and our importance never greater.With our new UNIFE leadership,and with full support of the rail supply industry,I have every confidence that 2025 will be another strong and memorable year for our sector!Have a pleasant read,Michael PeterChair of UNIFE,and CEO of Siemens Mobility3 Message from UNIFE ChairMessage from Enno Wiebe,UNIFE Director General2024 was a turbulent year across European and global politics,which has made it a compelling time to join UNIFE.As one of the most established industry associations in Brussels,I have been humbled by the sense of community,the ambitious nature of our members and the tasks we have as an industry ahead of us.In having focused conversations with our members and various stakeholders,it is clear that our priorities in 2024,now and the near future come under two key umbrellas:competitiveness and funding.Our industry and broader sector is vital to Europes economic security and future prosperity.Our products ensure goods and people are moved across the continent in the most environmentally friendly and safest way possible,also while driving innovation in mobility.In order to keep Europe on a trajectory to wealth,we have and we continue to advocate strongly for European companies and businesses to remain competitive in a global marketplace.While it is a positive to see this as a priority for the new European Commission,we spent 2024 tirelessly working throughout the EU Election period to ensure future reforms are of the most immediate pressing concern for industry.This includes our recurring efforts on EU Public Procurement upcoming reform and the Foreign Subsidies Regulation,which remain a cornerstone of the conversations we have had across the European institutions.We are pushing the need to ensure European companies benefit and are best placed when it comes to European initiatives and funding.This often leads our conversations with the Member States,with whom I have sought to enhance our relationship with.We need to greater outline the value of the sector at a more regional and local level,which includes outlining how we can best protect local jobs,drive economic growth across regions,and boost rail links to improve the quality of life of citizens.4UNIFE Annual Report 20242024 was a packed calendar year for the association attending a range of events,advocating for the rail industry,building networks and working to deliver on our initiatives.This includes attending InnoTrans 2024 where we had the opportunity to showcase an industry on the cusp of transforming itself,and the way European passengers and freight move across the continent in economically difficult times.As well as our presence at the Connecting Europe Days in Brussels,where we showcased how vital ERTMS and DAC are to completing the TEN-T network and driving European competitiveness.UNIFE successfully also unveiled the 10th edition of its World Rail Market Study,which details the positive horizon the sector is working towards,with a detailed forecast suggesting the global market is expected to grow by 3%annually in real terms for the rest of the decade.By the end of this period,the average market size of the global rail industry is expected to expand to 240.8bn.Nonetheless,the overall accessibility to markets continued to decline,in line with the historical downtrend,reaching only 59%in 2021-2023.We and to a point,personally need to remind everyone across the sector and the European institutions of what is at stake if ERTMS(especially the future upgrade to FRMCS),and DAC are not fully rolled-out as envisioned,as we potentially could miss out on the full benefits of this dynamic technology.This is why we ensured the signature of the ERTMS Stakeholder Platform Board joint declaration at InnoTrans,while also specifically advocating on behalf of dedicated resources from the Multiannual Framework 2028 2034 the EUs budget to the ERTMS roll-out,and DAC programmes.Following up on the European Year of Skills,UNIFE held in 2024 dedicated forums to progress the agenda of addressing skills shortages in the rail supply industry such as the High-Level Rail Skills Conference in March,followed by the conclusion of the STAFFER programme in October,where we hosted many sector representatives and high-level attendees from the European institutions to progress solutions to these issues.Empowering young people to undertake Railway Erasmus across Member States and building a unique information portal to consolidate the Europe-wide offer of rail-related educational programs,were some of the many recommendations outlined by the Skill Training Alliance For the Future European Rail System(STAFFER)project in its final report,which we will continue to advocate for in 2025 and beyond.We continue to be significantly active in the development of a truly Single European Rail Area.This included on-going work for the next update of the Technical Specifications for Interoperability,exploiting the potentials of Europes Rail Joint Undertakings Innovation and System Pillar and ensuring the necessary reforms for the Fourth Railway Package are delivered upon.UNIFE as Representative Body is continuously supporting the work of the European Union Agency for Railways(ERA).UNIFEs commitment to research and innovation continued not only our involvement in many research programs,but our ongoing advocacy for the future rail research program beyond Europes Rail Joint Undertaking.We will remain active and vocal on the need to ensure any future European R&I program is able to drive innovation happening within the sector and to share benefits across Europe.It is also of utmost importance to better link the European R&I program with pre-deployment activities and to support initiatives like the Europes Rail Deployment Group launched in 2024.With geopolitical and digitalisation challenges,Cybersecurity becomes a considerable focus for the rail supply industry going forward.We are in the process of developing a sector wide approach in response to the Cybersecurity Resilience Act,which ensures future legislation gives equal responsibility to all stakeholders.UNIFE succeeded to launch and to be nominated as the coordinator of the first rail sector cybersecurity group bringing together European railway undertakings,infrastructure managers and suppliers.This is vital to containing future cyber threats,which is why we intend to use our new membership of the EU Commissions Cyber Resilience Act Expert Group to work constructively with stakeholders to protect the 5 Message from UNIFE Director GeneralEuropean railway system as well as broader mobility infrastructure.In 2024,the IRIS Certification team rolled-out the rev.04 update to the IRIS Portal,which sought to streamline and improve the auditing process.Further to this,the team used InnoTrans as an opportunity to showcase the new scheme,which intend to elevate the level of quality control across the industry.Looking ahead into 2025,our focus will turn to advocating for consistent and comprehensive funding and broader assurances on the delivery of TEN-T,ensuring regulatory stability and a reduction of administrative burdens for the industry,amid a backdrop of challenging geopolitical,European and domestic political situations.I am confident we can take on the challenge,seize the opportunities and accomplish much with the passionate,ambitious and growing team that we have in Brussels.My ongoing commitment to building bridges not walls within the association,the industry,broader sector and the institutions,is done in the hope of reaching and accomplishing rails future goals together.Enjoy the reading,Enno WiebeDirector General of UNIFE6UNIFE Annual Report 20247 Message from UNIFE Director GeneralUNIFE in 2024UNIFE Mission01.1423“Promoting Rail Market Growthfor Sustainable Mobility”Promoting European policies and programmes favourable to railProviding UNIFE Members with strategic and operational knowledgeWorking towards an interoperable and efficient European railway systemEnsuring European Rail Supply Industrys leadership through advanced research,innovation and qualityUNIFE Mission10UNIFE Annual Report 2024How UNIFE WorksII.Public AffairsIII.European Rail ResearchIV.IRIS CertificationI.EU Standardisation&HarmonisationEuropean Rail Supply IndustryEuropean Union Collaborating with the European Union Agency for Railways on the definition of rail regulations(including the Technical Pillar of the Fourth Railway Package)and Technical Specifications for Interoperability(TSIs)Supplying expertise for European and International Standardisation Bodies(e.g.CEN/CENELEC,ISO)Contributing to the development of the Single European Rail Area Coordinating EU-funded research projects Playing an active role in ERRAC-the European Rail Research Advisory Council Cooperating with the Europes Rail Joint Undertaking and contributing to the follow-up of its activities Shaping the future of rail research&innovation in Europe The globally recognised rail quality management system Enables efficient business processes and leads to substantial quality improvements and cost reduction throughout the supply-chain More than 2275 IRIS Certification certificates issued worldwide Advocating policies that increase the global competitiveness of the European Rail Supply Industry Supporting modal shift policies that give priority to rail Encouraging investment in rail projects Promoting rail transport as the best solution to meet social challenges of the future11 01.UNIFE in 2024 0405Building the future of rail,together!you?EU institutionsIndustry/TradeOthersCMYCMMYCYCMYKMembership_Brochure_2025(1).pdf 1 2025.01.26.15:25:04With whom we work12UNIFE Annual Report 2024 0405Building the future of rail,together!you?Partner eventsRail organisationsStandardisationResearchRBrussels,05 March 2022MEETINGMINUTESUNITELCMYCMMYCYCMYKMembership_Brochure_2025(1).pdf 1 2025.01.26.15:25:0413 01.UNIFE in 2024UNIFE StructurePublic AffairsStrategy CommitteeOffice ManagerPublic Affairs Liaison GroupNational AssociationsSME CommitteeTrade and International Affairs CommitteeDigitalisation CommitteeInvestment and ProjectFinancing Expert GroupCommunications Communications CommitteeGender Equity Advisory Group MembershipIRIS CertificationIRIS Steering Committee IRIS Topical Working GroupsUNIFE General AssemblyFinance,Legal&HRUNIFE Presiding BoardDirector GeneralTechnical AffairsTechnical PlatformFreight CommitteeSystem PillarCommitteeInfrastructureCommittee(UNIRAILINFRA)Cybersecurity Working GroupResearch&Innovation CommitteeERWA Steering CommitteeUNITELStandards&Regulation GroupControl-Command&SignallingUESCCCS PlatformUNISIGSustainable Transport CommitteeUNIFE Staff&UnitsUNIFE Management CommitteesUNIFE Working Groups&Projects14UNIFE Annual Report 2024Pascal SchweitzerCEO,Faiveley Transport Giuseppe Marino*CEO,Hitachi Rail GroupJavier Martnez OjinagaCEO,CAF GroupAugusto MensiCEO,Lucchini RSHenri Poupart-Lafarge CEO,AlstomNicolas LangeMember of the Executive Board and Responsible for the Rail Vehicle Systems division,Knorr-Bremse AGRoger Dirksmeier Managing Director,FOGTEC(representing the UNIFE SME Committee)Franz Kainersdorfer Member of the Management Board,Voestalpine AGMembers of the Presiding Board Michael PeterCEO,Siemens Mobility2023-2026 UNIFE Presiding BoardUNIFE Chair*Subject to approval of the UNIFE General Assembly in June 202501.UNIFE in 202415 The Presiding Board is UNIFEs highest committee.It is responsible for the management of the association.The Board takes any measure or action required to achieve the objectives and general policies of the association.This body reviews applications for membership before they are submitted to the General Assembly for ratification.The Presiding Board is composed of 9 members elected by the General Assembly,every three years.One seat on the Presiding Board is reserved for the Chair of the UNIFE SME Committee.The Strategy Committee steers UNIFE activities and advises the Presiding Board on all strategic and political issues.It is composed of high-level managers representing the associations most prominent members.The Technical Platform brings together all UNIFE Members and equally covers all EU research,technical harmonisation and standardisation matters.The platform regularly reports on relevant developments and the Associations activities at EU level standardisation bodies.It also shares news regarding the Associations R&I projects,including Europes Rail Joint Undertaking.The Technical Platform communicates changes within the regulatory framework in regards to the European Union Agency for Railways(ERA)and the European Commission(i.e.DG MOVE,DG RTD,DG CONNECT,etc.,).This body enables all members to have a better understanding of current EU rail technical issues,their background and their implications for the industry in Europe and beyond.The UNIFE Freight Committee gathers companies active in the rail freight business and aims to strengthen the position of the industry within the European institutions policy priorities.This committee provides its members with information and support on EU R&I funding opportunities,rail freight policy developments and participation in EU lobbying on pertinent rail freight developments,including discussions concerning ongoing and upcoming TSIs/Standards,as well as following the Digital Automatic Coupling activities at European level including the work of the Task 4 of Europes Rail System Pillar.UNIRAILINFRA is a consensus-building platform focused on rail industry infrastructure at a pre-competitive stage.It promotes investment and innovation in the railway infrastructure and energy areas.UNIRAILINFRA brings together companies specialising in the manufacturing and supply of fixed railway equipment linked to the infrastructure and energy subsystems with companies that design,construct and maintain those products.This committee provides its members with information and support on EU R&I funding opportunities,rail infrastructure policy developments and participation in EU lobbying on pertinent topics such as public procurement,investment and revision of TSIs/standards.The Research and Innovation(R&I)Committee is responsible for monitoring European rail research opportunities and preparing recommendations.It is responsible for the regular exchange of information on European rail research,including updates pertaining to Europes Rail Joint Undertaking,discussions on Horizon Europe R&I work-programmes and the definition of railway suppliers R&I positions.The committee also drafts common UNIFE Committees and Working Groups16UNIFE Annual Report 2024positions that will be defended at the EU level.Its purview also includes contributing to ongoing initiatives such as ERRAC,Europes Rail and European Commission consultations on R&I.This committee is also following the preparation of the upcoming European Research Framework Programme(FP10).The UNIFE System Pillar Committee is responsible for the definition of the overall strategy and strategic guidance of UNIFE regarding Europes Rail System Pillar activities.This committee is following Europes Rail System Pillar activities and aims at defining UNIFEs position on the strategic topics discussed in the System Pillar.This committee is composed notably of UNIFE Europes Rail Founding Members and members of the UNIFE Strategy Committee.This committee is working in close contact with UNITEL,UNISIG,SRG and the UNIFE Freight Committee.The UNIFE System Pillar Technical Group is responsible for the follow-up of the Task 1 of Europes Rail Joint Undertaking dealing notably with the definition of the high-level architecture of the European railway system.It defines UNIFEs position on strategic topics linked to the evolution of the European railway system.The Committee brings together representatives from UNITEL,UNISIG and SRG and reports to the UNIFE System Pillar Committee.The Standards and Regulation Group(SRG)steers UNIFEs technical activities pertaining to the European regulatory framework i.e.the Railway Interoperability and Safety Directives,TSIs,and standardisation,in Europe and abroad.The SRG coordinates the UNIFE positions towards the European Union Agency for Railways(ERA)and the Group of Representative Bodies(GRB).The SRG is composed of the standardisation,regulation and authorisation managers from UNIFEs main system integrators and subsystem suppliers.The European Railway Wheels Association(ERWA)aims at promoting usage benefits,lifecycle cost reduction and standardisation of railway wheels and wheelsets.Its mission includes developing standards and promoting innovation in safety and environmental friendliness.The group also encourages the adoption of best practices across the European market.The ERWA Steering Committee is composed of CEOs from European wheels and wheelsets manufacturers.It is supported by the Development Committee,which analyses political issues,market strategy and communications;and the Technical Committee,which deals with standardisation,regulation and research.The Digitalisation Committee focuses on developing digital technologies in the rail sector from a political,technical,and business perspective.The main objectives of the Committee are to bring the rail supply industrys view to the centre of the EU-level digital debate.In addition,the members aim to understand better the potential opportunities and challenges of digitalising rail transport.The Cybersecurity Working Group brings together the associations member companies that possess significant cybersecurity expertise.This working groups main objective is to provide UNIFE members with a forum to discuss and identify opportunities for cybersecurity cooperation within the European rail sector,strengthening its position when compared to competitors and other stakeholders.This working group is responsible for the follow-up of the implementation of the Cyber Resilience Act and the coordination at sector level through the rail sector cybersecurity platform.UNISIG Committee is the technical body responsible for the development,maintenance,and updating of the ERTMS and CCS/TMS technical specifications.For ERTMS in particular,this process is carried out in close cooperation with the European Union Agency for Railways(ERA).Within the membership of UNISIG,there are three categories:full members,associated members,and partners.UNISIG is governed by a Steering Committee(SC)comprised of senior technical managers from the full members,and is supported by a technical authority known as the Supergroup(SG),which consists of highly qualified ERTMS experts from each of the full members.The detailed technical work of UNISIG is carried out in Work Groups(WGs)responsible for specific technical specifications or in Mirror 17 01.UNIFE in 2024Groups corresponding to ERAs Working Groups,where UNISIG is represented by appointed experts.The UNIFE Extended CCS Steering Committee(UESC)coordinates UNIFEs strategic and political ERTMS activities.UESC members regularly liaise with European Commission(DG Move)and European Railways Agency(ERA)representatives to address any political issues related to ERTMS and organise high-level meetings between European bodies representatives and Signalling companies CEOs and/or Directors.The ERTMS Marketing Group(UEMG)is tasked with coordinating any marketing activities related to the European Rail Traffic Management System(ERTMS).This includes collecting and disseminating deployment statistics,planning events,generating common publications such as factsheets,flyers,and brochures,as well as managing the ERTMS website.The Control Command and Signalling Platform(CCS-P)is a platform aiming at exchanging on control command and signalling topics.The platform is an information and sharing platform focusing on the progress of Europes Rail Joint Undertaking System Pillar activities especially regarding Task 2 of the System Pillar dealing with Control Command and Signalling.The UNITEL Committee focuses on the development and implementation of the future railway mobile communication system(FRMCS),the inherent successor of GSM-R,as part of the future ERTMS and interoperable railway.UNITEL brings together the major railway telecommunications products suppliers and companies that have significant experience in current GSM-R and future railway systems.The committee members aim to ensure that the railways communication system fulfils existing and future signalling,train control and traffic management requirements,as well as supports European railway research initiatives.The National Associations Committee gathers the directors of 12 national rail associations from 11 different EU Member States,collectively representing more than 1,000 large-and medium-sized European rail supply companies.As UNIFE Associate Members,these organisations promote our positions domestically while elevating national concerns to the European level.The Public Affairs Liaison Group(PALG)brings together representatives of full UNIFE Members responsible for EU and national advocacy.It discusses lobbying strategies concerning important EU political files.It also identifies synergies between the association and its membership for impactful lobbying activities and campaigns.The SME Committee is a platform of 45 UNIFE Members to share information and learn about EU policies impacting SMEs and available EU funds accessible to them.The committee is working to facilitate SME member access to EU funding support schemes,and to understand the impact of EU policies in the fields of industry,environment,intellectual property,investments,digitalisation,skills,and others.UNIFE is supporting its SME members through the SME Committee by reporting on the latest developments at the EU level and sharing best practices to learn from each other.The Trade&International Affairs Committee(TIAC)oversees the monitoring of EU trade negotiations and instruments with potentially significant implications for the European rail supply industry and coordinating UNIFEs responses.The Committee also focuses on public procurement,be it at international or EU level.TIAC is also a platform for the exchange and dissemination of information on bilateral cooperation activities undertaken by UNIFE in international markets.The Sustainable Transport Committee(STC)brings together the rail supply industrys leading experts on sustainability-related topics.The STC defines the strategy and carries out UNIFEs activities in the field of sustainable mobility,climate crisis,energy efficiency,urban mobility,circular economy,sustainable finance(EU Taxonomy)and any other relevant EU policy initiative.The STC coordinates the activities of three technical expert bodies,named Topical Groups:the Life-cycle Assessment Topical Group(LCA TG),the Chemical Risks Topical Group(CR 18UNIFE Annual Report 2024TG),and the Corporate Sustainability Reporting Directive Working Group(CSRD WG).The Investment and Project Financing Expert Group brings together high-level executives responsible for EU funding and financing,finance and corporate relationships with financial institutions,such as the European Investment Bank(EIB)and national export credit agencies.This committee explores and assesses EU funding avenues for rail related projects,including Public Private Partnerships(PPPs).The Expert Group advocates for providing enabling conditions and appropriate regulatory EU and international funding frameworks for rail.The International Railway Industry Standard(IRIS)Steering Committee was established in 2006 and is composed of high-level representatives from the UNIFE system integrators and equipment manufacturer membership.This steering committee is the UNIFE working group responsible for IRIS Certification operational management and decisions regarding resources,contracts and financial budgeting.The UNIFE Gender Equity Advisory Group is assessing the current situation of female employees throughout the industry,to understand barriers of entry for those wishing to have a fulfilling rail career and to craft association position papers,statements and recommendations in order to ensure the optimal mobilisation of the rail community going forward.The UNIFE Communications Committee steers the UNIFE Communication Strategy.It is composed of the Communications Directors of UNIFE members.Aerodynamics Brakes Cabin Chemical Risks Crash Safety Diesel Electromagnetic Compatibility(EMC)Energy Entity in charge of maintenance(ECM)Fire Safety(SRT)1520 Gauge vehicles Infrastructure Life Cycle Assessment(LCA)Noise Persons with Reduced Mobility(PRM)Railway Dynamics Rolling Stock Safety Assurance Signalling Special Vehicles Telematic Application for Passengers&Freight(TAP&TAF)Train Control Management System(TCMS)Vehicle Authorisation Wagon(WAG)UNIFE Technical Working Groups19 01.UNIFE in 2024European Affairs02.1.New institutions,new priorities.222.Industrial Policy.233.Skills Policy.264.Green and digital transition.285.Investment Policy.336.Public Procurement in Europe.391.New institutions,new prioritiesThe UNIFE Public Affairs unit was highly active in 2024,an electoral year in which both the mandate of the European Parliament and the European Commission were renewed.Before the European elections in June,UNIFE launched a campaign with its members on the future priorities,and expectations of the European Rail Supply Industry.The UNIFE manifesto“On the Move to a Net-Zero EU”was released in March 2024.The manifesto outlines the European Rail Supply Industrys priorities for the 2024-2029 EU legislative cycle,putting climate solutions,skills,public procurement,innovation and better regulation at the heart of a strategy that will turbo-charge European rail to create jobs as a net-zero industry.During the plenary sessions in Strasbourg and Brussels,the UNIFE team met Members of the European Parliament(MEPs)from various relevant Committees,many elected for the first time.The manifesto was a key element shared during the meetings in order to convey simple and clear messages.UNIFE also joined forces with other partners to meet the MEPs and influence the platform and agenda of the new Commission.UNIFE is an active member of the Rail Forum Europe(RFE),the association of the Members of the European Parliament dedicated to rail transport,and AEGIS Europe,an industry alliance representing over 25 key industries aiming to promote manufacturing investment,innovation,jobs and growth in Europe.In the same spirit,UNIFE is a member of the Platform for Electromobility,which brings together more than 40 members across the whole value chain of electric mobility and all transport modes,including rail.Being active in these coalitions is crucial to increasing the impact of our message and being heard by European decision-makers.The European Rail Supply Industry priorities for 2024-2029On the move to a net-zero EU:UNIFE manifesto-On the Move to a Net-Zero EU:The European Rail Supply Industry priorities for 2024-202922UNIFE Annual Report 20242.Industrial Policya.The Net-Zero Industry Act:Fostering clean technologies in EuropeAs part of the Green Deal Industrial Plan,the European Commission proposed the Net-Zero Industry Act(NZIA)to ensure that the green transition is not put at risk by strategic dependencies.UNIFE closely followed the negotiations on this initiative since some of the key energy technologies concern the rail supply industry value chain,in particular the electric propulsion technologies for transportation,batteries and electrolysers and fuel cells.An agreement on the NZIA was found between co-legislators and the Regulation entered in force on 29 June.In the framework of the implementing phase,UNIFE contributed to the work of definition of the technologies.Despite a limited positive effect on the European rail supply industry,this Regulation will most probably be a blueprint for the work of the 2024-2029 European Commission to foster EU-grown technologies including in the field of public procurement.EU NET-ZERO INDUSTRY ACT:MAKING THE EU THE HOME OF CLEAN TECH INDUSTRIESThe COVID-19 pandemic and the energy crisis driven by Russias invasion of Ukraine have exposed dependencies that can harm the competitiveness of EU industry.Making Europe an industrial base for net-zero technologies and increasing the EUs manufacturing capacity is essential to avoid harmful dependencies and to meet EUs ambitious climate and energy targets.The Net-Zero Industry Act will create a simpler and more predictable legal framework for net-zero industries in the EU,as part of Europes Green Deal Industrial Plan.It will support the EUs climate-neutrality commitment and the clean energy transition,strengthen the resilience of the EUs energy system,and contribute to establishing a secure supply of clean energy in line with REPowerEU.March 2023EU AMBITION FOR NET-ZERO TECHNOLOGIESThis legislation will help scale up net-zero technology manufacturing in the EU to provide at least 40%of the EUs annual deployment needs for strategic net-zero technologies by 2030.Simplifying the regulatory framework for net-zero technologiesScaling up manufacturing of net-zero technologiesFostering competitive and resilient European net-zero industryEuropean Commissions Factsheet on the Net-Zero Act23 02.European Affairsb.Mobility ecosystem transition pathwayIn January 2022,the European Commissions DG GROW published a Staff Working Document titled“For a resilient,innovative,sustainable and digital mobility ecosystem Scenarios for a transition pathway”.The Mobility Ecosystem(including rail supply)is one of the 14 priority sectoral groupings established by the European Commission.After a long process,the initiative culminated in 2024.In January,the European Commission published the final report titled“Transition pathway for the EU mobility industrial ecosystem”,which is based on the various roundtables and stakeholders consultations.In February,UNIFE participated in the Roundtable event organised by DG GROW on the Transition Pathway for the EU industrial mobility ecosystem.Particularly,UNIFE took part in a panel on the experience of the co-creation process with representatives from ACEA and CLEPA(automotive industry),SEA Europe(shipbuilding industry),CONEBI(bicycle industry),IndustriAll and CEEMET(social partners).There was alignment between the mobility ecosystem industries on a number of topics,including the need for regulatory stability,the question of the level playing field,and the need to strongly focus on skills and the shortage of qualified workforce across all sectors.This event marked the kick-off of a call for pledges,which closed in September and for which certain UNIFE Members provided pledges.1 European Commissions Transition pathway for the EU mobility industrial ecosystemRoundtable event on the Transition Pathway for the EU industrial mobility ecosystem24UNIFE Annual Report 2024c.EC Expert Group Competitiveness of the Rail Supply IndustryUNIFE continued using the EC Expert Group on the Competitiveness of the Rail Supply Industry as the platform to voice the needs and concerns of the European rail supply industry towards the EU institutions and the Member States.Throughout 2024,the European Commission revived the involvement of EU Member States in the discussions.In May and December 2024,two meetings of the European Commission(EC)Expert Group were held to discuss the worldwide rail market,the industrys economic situation,and major priorities of the rail supply industry such as EU public procurement.Looking forward,the continuation of the EC Expert Group after 2025 will be instrumental in maintaining our constructive dialogue and collaboration with the different Directorates-General(DGs)of the European Commission,the Member States,and the railway operating community.The recent meetings confirmed that this forum is a much-needed governance tool for discussing our industrys priorities at the EU level,in conjunction with the transition pathway.Meeting of the EC Expert Group on the Competitiveness of the Rail Supply Industry with Carlos Corts presenting the WRMS 25 02.European AffairsUNIFE pursued the topic of Skills in 2024,in particular in the context of the European Rail Skills Alliance(STAFFER).The ERASMUS financed project,which aims at supporting an overall sectoral skills strategy,developing concrete actions to address short-and medium-term training needs,and also identifying the most sought-after jobs within the European rail sector,concluded at the end of October 2024.Throughout the year,UNIFE organised and participated in several events to promote STAFFER and UNIFEs activities on skills.On 27 March,UNIFE organised the high-level conference,“NextGen Rail:Building The Workforce of Tomorrow for the Rail Sector”,in Brussels,with invitees such as Georges Gilkinet(Belgian Deputy Prime Minister and Minister for Mobility),and Andriana Sukova(Acting Director-General,DG Employment,European Commission).During the conference,speakers discussed policy changes and showcased the sectors initiatives to help end the rail skills shortage and focus on the skills needs of tomorrow.It also provided unique perspectives and insight on best practices regarding employee re-training and retention.On 15 April,UNIFE participated in the“Future Workforce and Skills”session during the Transport and Research Arena(TRA)Conference in Dublin.The STAFFER blueprint and its main outcomes and recommendations were presented to the audience.UNIFE had the opportunity to engage with different stakeholders and European Commission representatives,in highlighting the main challenges in resolving the issues for the rail supply industry and sector at large.3.Skills Policy“NextGen Rail:Building The Workforce of Tomorrow for the Rail Sector”26UNIFE Annual Report 2024On 24 October,after four years of collaboration,STAFFER held its final conference in Brussels.It gathered partners from across Europe to discuss the main outcomes and deliverables of the project.Beyond its contribution to the programme,UNIFE moderated the last panel discussion on the legacy of STAFFER that featured Kristian Schmidt(Director,Land Transport,DG MOVE,European Commission),Paloma Iribas Forcat(Chair of the ERA Management Board),Giorgio Travaini(Executive Director,Europes Rail Joint Undertaking),Enno Wiebe(Director General,UNIFE)and Alberto Mazzola(Executive Director,CER).STAFFER Final Conference:UNIFEs Director General Enno Wiebe featuring in the panel on the legacy of the projectFurthermore,UNIFE contributed to several key project deliverables,including the Final Report.It also delivered,along with CER,the Policy Recommendations to decision-makers.On top of the various events organised during the year,UNIFE advanced on its communication channels and online activities around skills,attractiveness and diversity,supported by infographics,informative video reels and press articles.Policy Recommendations DELIVERABLE D8.4 Formoreinformation,pleasevisit STAFFERs dedicated website.27 02.European Affairsa.Greening Freight Transport PackageIn July 2023,the European Commission presented measures to make freight transport more efficient and more sustainable,with three initiatives-improving rail infrastructure management(the revision of the Regulation on the use of railway infrastructure capacity),offering stronger incentives for low-emission lorries(the revision of the Weights and Dimensions Directive),and better information on freight transport greenhouse gas emissions(CountEmissions EU).The aim is to increase efficiency within the sector,helping it to contribute to the target of cutting transport emissions by 90%by 2050,as set out in the European Green Deal,while allowing the EU single market to continue growing.UNIFE followed the three topics,knowing that the first one is important for operators and rail infrastructure managers.At the same time,revising the Weights and Dimensions Directive will be crucial for the rail sector as all the new lorries must be compatible with rail.Rail-based multimodal transport chains are the most efficient way to save energy overall.With“CountEmissions EU”,the European Commission proposed a common methodology for calculating transport operation greenhouse gas(GHG)emissions across different modes.Companies will calculate their GHG emissions voluntarily.The methodology aims to provide reliable data on door-to-door emissions to enable proper service benchmarking,and to allow consumers to make informed choices on transport and delivery options.4.Green and digital transitionTransport is responsible for almost 25%of greenhouse gas(GHG)emissions in the EU28UNIFE Annual Report 2024Count Emissions EU is necessary to avoid greenwashing practices in transport.However,the proposed initiative is problematic for the rail sector,with default values too negative for the rail GHG emissions,despite the rail sector being responsible for only 0,5%of the emissions in the transport sector in Europe(see below).Therefore,UNIFE has been active on this topic,sending proposals in January 2024 to MEPs and EU Member States,and having meetings with the European Commissions DG MOVE.UNIFE will continue to be active on this topic in 2025 with the start of interinstitutional negotiations.The decarbonisation of the rail sector is included in the broader context of reducing the environmental impacts for the rail sector.Known as circular economy,this economic model is increasingly important as the new European Commission have placed it at the centre of its platform.As mentioned at the event on circular economy organised at InnoTrans by Alstom,UNIFE has a role to play in fostering collaboration between the manufacturers(and their suppliers),the operators and the European institutions.Many initiatives have already been implemented to facilitate the transition to a shared circular economy approach and strategy,for instance,all the UNIFE environmental technical documents,such as the Rail Industry Substance List(RISL)or the Material and Substance Declaration Template(MSDT).Jonathan Nguyen(UNIFE Head of Public Affairs)at the event on circular economy organised by Alstom at InnoTrans on 25 September29 02.European Affairsb.European Taxonomy and CSRDUNIFE and its members continue to be active on the EU Taxonomy file,as this topic is vital to channel investments towards greener projects and financing solutions,including the rail sector and supply industry.UNIFE continued to support the Commissions ambition to use the EU Taxonomy Regulation to define a common classification scheme,including criteria for identifying sustainable economic activities,to guide investors and financial institutions through a truly green transition.The EU Taxonomys regulatory framework must enable fair,verifiable and reliable comparability between the different economic activities and modes of transport.UNIFE continues to have concerns regarding its contribution to a level playing field.The European Commission undermines its sustainable-finance investment criteria by including modes of transport in the EU Taxonomy that are not“contributing substantially to climate change mitigation or adaptation”,such as the aviation sector.The European Commission should instead incentivise investment and development in zero-or low-emission modes of transport,like rail.With a position paper released in March 2024 and sent to the European Commission,the European rail supply industry has raised concerns about aligning economic activities in the EU Taxonomy with the Do No Significant Harm(DNSH)criteria on“pollution prevention and control regarding the use and presence of chemicals”.At the moment,implementing the DNSH criteria goes beyond the current scope of legal restrictions.The EU taxonomy criteria should be based on a risk-based approach.Consistency between the Taxonomy DNSH criteria and the perimeters of restrictions in existing chemical regulations must be ensured.The situation has potentially harmful financial consequences for the rail supply industry.UNIFE is therefore following this topic carefully,and is in contact with other stakeholders to clarify concerns on the issue.The Corporate Sustainability Reporting Directive(CSRD)is a binding EU legal framework linked with the EU Taxonomy,and is vital for the future of the European industry.It requires large companies to publish regular reports on the Environmental,Social,and Governance(ESG)risks they face and how their activities impact people and the environment to drive investments in sustainable activities.The UNIFE Sustainable Transport Committee(STC)and the new CSRD ad hoc Working Group support members in complying with the CSRD requirements and developing a unified interpretation of the key performance indicators(KPIs)for ESG,aiming for consistency,efficiency,and relevance.This work aims to improve the reporting and sustainability performance of the rail industry,including operators and infrastructure managers.www.unife.org 0 Making the EU Taxonomy work for the European Rail Supply Industry March 2024 UNIFE position paper:Making the EU Taxonomy work for the European Rail Supply Industry30UNIFE Annual Report 2024c.PFAS restriction proposal and chemicals regulationPer-and poly-fluoroalkyl substances(PFAS)are a family of artificial chemicals with about 12,000 different substances.PFAS have various valuable characteristics,bringing unique combinations of properties such as durability under extreme conditions(temperature,pressure,radiation,chemicals),electrical and thermal insulation,heat transfer,clean fire suppression,lubrication,and water and dirt repellence.Besides widespread consumer uses,PFAS are used in many industrial sectors,including the rail supply industry and its entire value chain,such as refrigerants(F-gases),electronic components,hydraulic fluids,lubricants,sealings,plastics,textiles,adhesives or paints.However,PFAS have a high persistence associated with potential environmental and human health concerns,thus their prevalence in high-impact media coverage,which labels them as“the forever chemicals”.The European Chemicals Agency(ECHA),backed by the national authorities of Germany,Denmark,the Netherlands,Norway and Sweden,published a PFAS restriction proposal on 7 February 2023.The proposed restriction on PFAS is set to be one of the largest ever on chemical substances in the European Union.If approved,manufacturing and placing products containing PFAS on the EU market will no longer be permitted in the near future(around 2030).After this,possible derogations might exist for a use-specific and a time-limited transition period(maximum until around 2045)without extension or renewal.This means work on alternatives by industry is essential.For this reason,UNIFE organised an internal webinar for its members,accompanied by a factsheet explaining the PFAS restriction proposal for the rail sector.Matteo Barisione speaking on PFAS at the UNIFE General Assembly31 02.European AffairsThe 6-month ECHA public consultation received more than 5,600 submissions from over 4,400 organisations,including the 68-page contribution from UNIFE and its partner organisations.Endorsed by nine rail organisations led by UNIFE,it proposes a mapping of the PFAS used by the railway sector,a list of alternatives(when possible),and a table listing derogations for essential PFAS applications.With the same rail organisations,UNIFE sent an open letter to the European Commission in February 2024 explaining that the PFAS restriction proposal is a key concern for the European rail sector.The European Transport Coalition on PFAS,a coalition of transport associations created and led by UNIFE,organised meetings with the European Commission.The coalition shared common concerns about the critical impact of the PFAS restriction proposal on mobility and its industries.UNIFE will continue monitoring the European Chemicals Agencys next move.UNIFE also applied and was accepted as a new(occasional)accredited stakeholder at ECHAs expert groups.Over 100 organisations are accredited,of which 75%are industry associations.The final ECHA proposal will be sent to the European Commission.Therefore,raising awareness of the potential negative impact of a total PFAS use ban on the rail sector is crucial.On chemical regulations,UNIFE is also active within the Alliance for Sustainable Management of Chemical Risk(ASMoR),a coalition that focuses on applying the Essential Use Concept(EUC)and other issues relating to risk management of chemicals in the European Union to ensure the safe use of hazardous substances.Finally and with the support of its Members,UNIFE also updated and clarified several UNIFE technical documents related to the environment.These included the F-gases factsheet,the Rail Industry Substance List(RISL),and the Material and Substance Declaration Template(MSDT).On 15 October 2024,a well-attended webinar was organised by UNIFE to explain these updates to its members.Per-and poly-fluoroalkyl substances(PFAS)are a family of artificial chemicals with 12,000 differentsubstances.PFAS are used in many products and have various valuable properties:lubricant,water anddirt repellence,durability under extreme conditions(temperature,pressure,radiation,chemicals),electrical and thermal insulation,refrigerants etc.However,PFAS have a high persistence associatedwith potential environmental and human health concerns,thus the alternative name of“the foreverchemicals”.PFAS restriction proposal:a key concern forthe European rail stakeholdersThe following European rail stakeholders associations are signatories to this statement:Association of European Rail Rolling Stock Lessors(AERRL),Alliance of Passenger Rail New Entrants(ALLRAIL),Community of the European Railways and Infrastructure Companies(CER),European RailFreight Association(ERFA),International Union of Wagon Keepers(UIP),International Union for Road-RailCombined Transport(UIRR),International Association of Public Transport(UITP)and European Rail SupplyIndustry(UNIFE).PFAS,a large class of thousands of synthetic chemicalsFor this reason,on 7 February 2023,the national authorities of Denmark,Germany,the Netherlands,Norway and Sweden submitted a PFAS restriction proposal to the European Chemicals Agency(ECHA).The proposed restriction on PFAS is set to be one of the largest ever on chemical substances in theEU.As a result,manufacturing,using and placing products containing PFAS on the EU market will nolonger be permitted by 2027-2030.After this,possible derogations might be granted for use-specificcases and a time-limited transition period(maximum until 2039-2042)without extension or renewal.Inaddition,particular uses have been given time-unlimited derogations.Some PFASs are alreadyrestricted in the EU(PFOS,PFOA,C9-C14 PFCAs).This proposal does not affect these existingrestrictions and ongoing decision-making for PFHxS and PFHxA restrictions.ECHA and the PFAS restriction proposalPFAS are currently crucial for the European rail stakeholdersBesides some consumer products,PFAS are used in many industrial sectors,including the rail supplyindustry and its entire value chain.Some PFAS are crucial for the rail supply industry through their usein various applications-such as firefighting foam,refrigerant(F-gases),electronic components,batteries,fuel cells,hydraulic fluids,lubricants,sealings,plastics,textiles,adhesives,paints,etc.The European railway stakeholders support efforts to restrict PFAS,which pose unacceptable risks to human health or the environment,such as perfluorooctanoic acid(PFOA).The European rail stakeholdersare committed to continuously improving their products and servicesenvironmental compatibility and safety.Open letter to the European Commission explaining the key concern for the European rail sector32UNIFE Annual Report 2024d.Artificial Intelligence(AI)ActThe Artificial Intelligence(AI)Act is an initiative from the European Union that aims to regulate AI based on its capacity to potentially harm society.It follows a“risk-based”approach-the higher the risk,the stricter the rules.Companies need to ensure that their staff have sufficient AI literacy to deal with AI systems.This AI Act clarifies the obligations of each actor in the AI value chain.After the negotiating process,the Artificial Intelligence Act was officially adopted on 13 June 2024.Members of the UNIFE Digitalisation Committee identified one specific issue-the expected articulation between the AI Act and the sectoral regulation,in this case,Railway Interoperability Directive 2016/797.Yet,Directive 2016/797 only covers mainline railways,excluding urban rail systems,such as tramways and metros.These systems still undergo third-party assessments and follow national regulatory frameworks.AI and high-risk AI systems for mainline or urban rail are similar.Yet,they are subject to different regulations,leading to potential regulatory overlap.UNIFE contacted the European Commission,the Member State Representatives,and the MEPs in charge of the dossier to alert them on this topic.5.Investment Policy“With the new institutional set-up that emerged after the European elections in June 2024 and the inter-institutional budgetary discussions for the post-2027 programming period,UNIFE will strongly advocate for the imperative need of securing a significant share of EU funds for rail in the next EU Multiannual Financial Framework(MFF)2028-2034,whose preparations will start in 2025.This is an extremely important endeavour considering the benefits of rail transport for the European economy,the environment,the internal market(including European SMEs),the competitiveness of the EU industry and consequently,all of society”.33 02.European Affairsa.New EU MFF 2028-2034European Commission President Ursula von der Leyen announced on her re-election in June 2024 that “this will be an investment Commission”.This message is echoed by both the Enrico Letta report and Mario Draghi report,making strong calls for considerably scaling up investments at the EU level,including in rail transport and its associated technologies.In November,UNIFE finalised its position paper on the next MFF,highlighting the following building blocks for the configuration of the next EU MFF 2028-2034:A continuation of the Connecting Europe Facility programme,with a substantial budget increase is fundamental to accomplishing the TEN-T network Structural Funds must continue to play their role in supporting EU Member States and regions in overcoming disparities by boosting rail connectivity,including at the urban level An ambitious EU Research and Innovation programme to boost the rail industrys competitive edge,and to prepare for the adoption of future critical technologies Revamped blended finance programmes such as InvestEU,and regulatory updates are necessary to leverage public and private financing for rail.This will revitalise the European public-private partnership market for rail transport projects Powerful EU External Aid instruments to successfully implement EU Global Gateway post 2027 Emissions Trading System(ETS)revenues and carbon credits should be further leveraged to support more rail projects and associated technologies A centrally managed EU IPCEI fund should be established to support European rail projects as Important Projects of Common European Interest Strengthen European public procurement provisions to ensure fair competition,sustainable rail projects and European-grown jobs.This will help reward best practices in infrastructure project delivery The disbursement mechanisms of EU funds should be fit for purpose and carefully assessed depending on the funding instrument,its objectives and timelinesUNIFEs recommendations for the EU Multiannual Financial Framework(MFF)2028-2034UNIFEs recommendations for the EU Multiannual Financial Framework(MFF)2028-203434UNIFE Annual Report 2024The CEF II programme has continued to provide crucial support to the achievement of the Trans-European Transport Network(TEN-T).As the backbone of sustainable mobility in Europe,rail projects have received more than 70%of the 25.8 billion CEF transport funding through the four calls for proposals launched between 2021 and 2024,including through the military mobility ones.With the launch of the 2024 call last September and due to the front-loading of funding during 2021-2023,the CEF II transport budget will be mostly exhausted.Financial support through CEF grants will continue to be vital for the development of the TEN-T Corridors and ERTMS deployment.They are key to accomplishing the Single European Railway Area,which is crucial to bridging the gaps and bottlenecks,thus increasing the competitiveness of the European rail system.In this context,UNIFE will strongly advocate for CEF to continue to be the cornerstone of the EU Investment Policy in the transport sector in the post-2027 period.A first rail sector paper was published in December 2024,where AERRL,CER,UIP,UITP and UNIFE are calling for a new CEF with a co-funding of at least 100 billion.Thus,setting investment priorities to realise the Single European Railway Area including the TEN-T and to ensure that the transport system as a whole efficiently supports EUs economic growth.Furthermore,UNIFE will resume its engagement with the More EU Budget for Transport coalition to insist on robust EU funding for transport post 2027.b.Connecting Europe Facility(CEF)II Position Paper Brussels,05 December 2024 The new CEF 02.European Affairs35 c.Revised TEN-T RegulationThe new TEN-T Regulation-for which UNIFE has been strongly advocating to be as ambitious as possible-entered into force in July 2024.The Regulation defines the network through the European Transport Corridors in a three-layer approach.It sets out the requirements for our infrastructure to ensure a coherent quality throughout the EU.The core network includes the most important connections between major cities and nodes and must be completed by 2030.The extended core network needs to be completed ten years later in 2040.The comprehensive network connects all regions of the EU to the core network and needs to be completed by 2050.Particularly important,the revised Regulation establishes that ERTMS will be the single European signalling system to be deployed across the entire TEN-T network,enhancing rail safety and efficiency.It also mandates that national systems are decommissioned.Furthermore,rail-airport connectivity will be enhanced,and all major cities along the TEN-T network will develop sustainable urban mobility plans to promote zero and low-emission mobility.Finally,the TEN-T will also be extended to connect with European neighbours of the Western Balkans,Ukraine and Moldova.Furthermore,UNIFE participated in the Connecting Europe Days 2024(2-5 April,Brussels)where UNIFEs former Director General Philippe Citron participated in the session“Strategies for sustainable funding of European public transport”along with other stakeholders from the sector.d.European Structural and Investments Funds(ESIF)ESIF funds,aimed at supporting the EU Cohesion Policy,represent another very important tool to boost rail investments.In the 2021-2027 period,ca.30 billion will be allocated to rail-related investments.On top of the more traditional Cohesion Fund and European Regional Development Fund,the Just Transition Mechanism is also an avenue to explore.Particularly,its Public Sector Loan Facility provides financial support in the transport sector to regions,including for rail,both in the mainline and urban segments.The facility will mobilise additional investments with the support of the European Investment Bank(EIB).Nevertheless,ESIF implementation,after four years,is progressing very slowly.At this point,less than 10%of the total 368 billion of EU co-financing has been absorbed by Member States.In this sense,UNIFE will continue to echo this absorption challenge,calling for strengthening the collaboration between all stakeholders in order to deliver the projects on time.The Trans-European Transport Network(TEN-T)36UNIFE Annual Report 2024e.Recovery and Resilience Facility(RRF)The RRF-the core of NextGenerationEU-is set to provide 650 billion in grants and loans for ambitious investments and reforms across Member States to advance the green and digital transition,while strengthening the resilience and competitiveness of the EU.Member States Recovery Plans include numerous rail-related investments(amounting to ca.50 billion).However,the Recovery and Resilience Facility(RRF)legal basis establishes that all investments need to be completed by August 2026 in order for Member States to be able to request the corresponding payments from the European Commission.In the case of rail,due to the specificities of the industry,projects can take longer to complete.This poses a risk of funds being left unused,something UNIFE wants to avoid,as it would mean a lost historic opportunity to build and modernise rail infrastructure,as well as renew ageing rolling stock fleets.Throughout 2024,UNIFE alerted the European Commission several timeson this issue and remains available to propose and seek possible joint solutions to provide more flexibility and reap the full benefits of RRF investments for rail.According to the last RRF Annual Report,it is worth noting that the RRF has drivenover 82 billion ininvestments directly supportingbusinesses,and over 300 billion in RRF funds are expected to be disbursed by the end of 2024.02.European Affairs37 Regarding the revision of EU State Aid Guidelines for Railways and the proposal on the new Land Transport Block Exemption Regulation,UNIFE has submitted substantial feedback to the European Commission in order to improve and clarify some aspects of the existing proposals.UNIFE welcomes the Transport Block Exemption Regulation(TBER),as a new block exemption regulation and the new Land Multimodal Transport Guidelines(LMTG),to enable Member States to provide public aid that contributes to a modal shift towards sustainable land transport modes.Nevertheless,UNIFE has identified some aspects that require further clarifications and adjustments in order to reap the full benefits of this initiative and accelerate the modal shift to rail.This notably includes the scope of the operating aid for reducing external costs of transport,the scope of beneficiaries eligible to receive investment aid for the acquisition of rolling stock,including the type of financial instruments.This also includes the investment aid for interoperability,including ERTMS and DAC(and the aid intensity related to these categories),the classification of zero-emission and bi-mode rolling stock.UNIFE also highlights that when State Aid is aimed at supporting the procurement of assets regardless of the private or public nature of the beneficiary,the principle of the Most Economic Advantageous Tender(MEAT),as well as a level playing field with non-European economic operators(including as per the Foreign Subsidies Regulation)must be properly implemented.f.EU State Aid Rules38UNIFE Annual Report 20246.Public Procurement in EuropePublic procurement spending in the EU totals approximately 14%of GDP(2 trillion/year)by over 250.000 public authorities(with the majority of rail and urban transport operators being public authorities).Public procurement is by far the predominant and most common process for funding rail projects in Europe,especially taking into account the various funding and investment opportunities for rail in the EU(e.g.the National Recovery Plans(NRPs)and other sources of EU funding).Therefore,UNIFE remains committed to ensuring that funding dedicated to rail should be spent in the best possible way to ensure fair competition between suppliers,and to establish an approach in rail procurement that focuses on best value rather than on price criteria only.Throughout 2024,UNIFE has actively continued to stress the importance of implementing the Most Economically Advantageous Tender(MEAT)principle across rail public procurement through several initiatives:On 30 April and 1 May,UNIFE participated in the Middle East Rail Conference in Abu Dhabi and spoke about strategic European public procurement.UNIFE highlighted the need to foster successful rail investments attached to best value(MEAT principle).On 14 May,UNIFE organised the conference“Best value procurement for Rail Can Europe make a step-change In award criteria?”in Vienna.The conference was organised in partnership with the Austrian and German Rail Industry Associations,and kindly hosted by BB.The event gathered representatives from the railway operating community and the suppliers.It featured fruitful workshops on experiences and best practices on how to apply the MEAT principle while showcasing the financial,social and environmental benefits of applying the MEAT principle.The UNIFE conference“Best value Procurement for Rail-Can Europe make a step-change In award criteria?”02.European Affairs39 In the last quarter of 2024,UNIFE also prepared for the upcoming evaluation of the EU public procurement framework.Indeed,in her Political Guidelines from July 2024,the European Commissions President Ursula von der Leyen announced a major revision of the 2014 Directives,notably with the goal to give preference to European products for certain strategic sectors.While many of the announced directions are in line with UNIFEs previous positions on the matter,UNIFE has undertaken a major consultation process within its Membership in order to draft a comprehensive position in the course of 2025.During 2024,UNIFE updated its contribution to the interactive map on the activity of third-country State-Owned Enterprises(SOEs)in the European procurement market.This map,created with the European Construction Industry Federation(FIEC),European International Contractors(EIC),and the European Dredging Association(EuDA),displays all projects in which third-country SOEs have tendered since 2009 in the construction,dredging and rail supply sectors.It confirms that the interest of third-country SOEs in the European public procurement market has kept growing significantly in recent years.Lastly,in 2024,UNIFE chaired two meetings of the AEGIS Europe alliances Working Group on Public Procurement,which gathers several industry associations driven by common interests and challenges in the field.Along with UNIFE,AEGIS Europe continues its efforts to promote a fair European and international public procurement framework towards the European institutions and individual Member States.UNIFE and partners map on SOEs tenders in the EU40UNIFE Annual Report 202402.European Affairs41 International Affairs03.1.Organisation for Economic Co-operation and Development(OECD).442.Towards an EU Strategy for Export Credits.453.European Union Global Gateway Strategy.464.Foreign Subsidies Regulation.475.Carbon Border Adjustment Mechanism .496.EUs Foreign Direct Investment Screening Regulation 507.Bilateral cooperation with third countries.511.Organisation for Economic Co-operation and Development(OECD)Work in 2024 for UNIFE with the OECD,hinged on the 2023 publication of the OECD(Organisation for Economic Co-operation and Development)trade policy paper Measuring distortions in international markets The rolling-stock value chain.The report helped shed light on the magnitude and the manner in which governments subsidise the rolling stock manufacturers that they deem as strategic,with a view to informing efforts to revisit global trade rules.It also highlighted that government support to rolling stock manufacturers is raising concerns about possible market distortions and unfair competition.In the report,it is notably stated that“CRRC obtained as much as 72%of all absolute support”(through grants,tax concessions,below market borrowings,etc.),and that CRRC obtained“tax support of more than$400 million in 2020 alone”.Throughout 2024,UNIFE has continuously communicated on this important policy paper towards the new EU institutions and key-stakeholders,both in Europe and beyond.The report has also provided a credible and substantiated basis for important EU autonomous tools such as the Foreign Subsidies Regulation,which aims at tackling distortions on the European single market.Furthermore,as a Member of Business at OECD(BIAC),UNIFE has continued to participate in meetings and contributed to business positions in order to advance the interests of the European Rail Supply Industry on level-playing field issues.OECD Trade Policy Paper:Measuring distortions in international markets The rolling-stock value chain44UNIFE Annual Report 20242.Towards an EU Strategy for Export CreditsDuring the past year,UNIFE has been closely monitoring the developments on the EU Export Credits Strategy.Following the 2023 Feasibility Study on an EU Strategy on Export Credits-for which UNIFE and its Members communicated their challenges and priorities-there are a couple of milestones worth highlighting.The European Commission,the European Investment Bank(EIB)and the European Investment Fund(EIF)have established a 300 million export credit guarantee facility under the EU flagship investment programme InvestEU.This agreement enables the InvestEU guarantee to be used by the EIB Groups risk-capital subsidiary,the European Investment Fund,to support the export credit sector,aimed at boosting exports to Ukraine by small and medium-sized companies in the EU.This initiative aims to reduce financial risks,encouraging EU businesses to increase exports to Ukraine and revitalise trade.The facility will strengthen economic ties with the EU and contribute to Ukraines economic recovery.The Commission has explained that this initiative is a pilot project in the context of the European Export Credit Strategy,aimed at coordinating and supporting national ECAs.The Commission also mentioned that if this proves successful,a similar initiative could be replicated at other sectors such as infrastructure/transport.However,the Commission has established an Expert Group on Enhanced Coordination of External Financial Tools.The Members of this Expert Group are development finance institutions of the Member States(DFIs),national development banks of the Member States(NDBs),export credit agencies of the Member States(ECAs),the EIB,and group observers such as finance sector and EU business associations.UNIFE was invited to participate in the very first meeting of this Expert Group to present observations regarding global competition in the transport sector,including views on procurement procedures.From UNIFE,the main points elaborated revolved around the challenges related to procurement procedures in the context of Global Gateway projects,as well as unfair competition issues,such as low price bids practices,lack of level playing field and the applicability of the MEAT principle that should be part of the tendering process.03.International Affairs45 3.European Union Global Gateway StrategyThroughout 2024,UNIFE has further demonstrated its commitment to the effective implementation of the EU Global Gateway Strategy,by closely collaborating with the European Commission and other stakeholders.Global Gateway is the EUs contribution to narrowing the global investment gap worldwide,with a mobilisation of 300 billion investments up to 2027.It is in line with the commitment of the G7 leaders from June 2021 to launch a values-driven,high-standard and transparent infrastructure partnership to meet global infrastructure development needs.Firstly,at the 2024 UNIFE General Assembly,UNIFE organised the Dialogue Forum:Boosting the global presence of the European Rail Supply Industry A renewed EU&international toolbox to succeed,which counted with the participation of both DG INTPA and DG GROW.The discussion focused on how the different EU instruments such as the EU Public Procurement Framework and strategies such as Global Gateway,can boost the global presence and competitiveness of European rail suppliers,who reaffirm their commitment to the principles of free trade,fair competition and a level playing field on global and European markets.UNIFE dedicated session to Global Gateway and Latin America during InnoTrans,with the participation of DG INTPA,Renfe and Alstom46UNIFE Annual Report 20244.Foreign Subsidies RegulationSecondly,UNIFE has co-chaired the launch of two Global Gateway Railways Working Groups for the Latin America&Caribbean and Asia/Africa regions.The objective of these groups is to coordinate EU action in the rail sector outside Europe,and to support the EU railway industry to gain access to market in the previously mentioned areas of cooperation and participate in tenders/projects.The work of the Railway Working Group is important to select priorities and design tailor-made action plans for the industry.During these meetings,UNIFE has clearly advocated on the need to work on the issues created by unfair competition and access to markets.The launch of the Working Group for Latin America and the Caribbean was followed by a dedicated session at InnoTrans,with the participation of DG INTPA,Renfe and Alstom.Last but not least,UNIFE has continued to be engaged in the Global Gateway Business Advisory Transport Sub-Group and its plenary meetings.In 2024,this group has provided a very concrete deliverable the paper Global Gateway and EU Contractors in third country markets current state of affairs and how to ensure a level playing field.This document has been welcomed by the European Commission,as a guiding tool that will feed into future discussions and Global Gateway implementation.The Foreign Subsidies Regulation(FSR)entered into force in 2023 and began on 12 October,when the reporting obligations to notify financial contributions,in the context of public procurement procedures and takeovers,were enabled.The Regulation grants the European Commission the power to investigate financial contributions granted by non-EU governments to companies active on the European market.The Commission can open investigations against market players and,if such financial contributions constitute distortive subsidies,the European Commission could also open redressive measures.European Commission-Press releaseCommission opens first in-depth investigation under the Foreign SubsidiesRegulationBrussels,16 February 2024Today,the Commission is launching its first in-depth investigation into the potentially marketdistortive role of foreign subsidies,exercising its powers under the Foreign Subsidies Regulation.Thisinvestigation relates to a public procurement procedure.It shows the Commissions determination topreserve the internal markets integrity by ensuring that recipients of foreign subsidies cannotbenefit from an unfair advantage to win public contracts in the EU,to the detriment of faircompetition.The investigation launched today follows a notification submitted to the Commission by CRRCQingdao Sifang Locomotive Co.,Ltd.,a subsidiary of CRRC Corporation,a Chinese state-owned trainmanufacturer.It concerns a public procurement procedure launched by Bulgarias Ministry ofTransport and Communications,relating to the provision of several electric“push-pull”trains as wellas related maintenance and staff training services.According to the Foreign Subsidies Regulation,companies are obliged to notify their publicprocurement tenders in the EU when the estimated value of the contract exceeds 250 million,andwhen the company was granted at least 4 million in foreign financial contributions from at least onethird country in the three years prior to notification.Following its preliminary review of the notification received from CRRC Qingdao Sifang Locomotive,the Commission considered it justified to open an in-depth investigation,since there are sufficientindications that this company has been granted a foreign subsidy that distorts the internal market.For this,the Commission had to assess whether the foreign financial contribution constitutes asubsidy that directly or indirectly confers a selective benefit to the company;and whether this allowsthe company to submit an unduly advantageous tender.During the in-depth investigation,the Commission will further assess the alleged foreign subsidiesand obtain all the information required to establish whether they may have allowed CRRC QingdaoSifang Locomotive to submit an unduly advantageous offer in reply to a tender.Such an offer couldcause other companies participating in the public procurement procedure to potentially lose salesopportunities.In line with the provisions of the Foreign Subsidies Regulation,at the end of its in-depthinvestigation the Commission may(i)accept commitments proposed by the company if they fullyand effectively remedy the distortion,(ii)prohibit the award of the contract,or(iii)issue a no-objection decision.CRRC Qingdao Sifang Locomotive submitted a complete notification on 22 January 2024.As of thatdate,the Commission has 110 working days,until 2 July 2024,to take a final decision.The openingof an in-depth investigation does not prejudge the outcome of the investigation.Companies and productsCRRC Corporation Limited(known as CRRC)is a Chinese state-owned rolling stock manufacturer.Itis the worlds largest rolling stock manufacturer in terms of revenue.Rolling stock manufacturersproduce the locomotives and carriages used by railway operators,as well as subways,trams andother railway vehicles.The Bulgarian Ministry of Transport and Communication public procurement tender is for 20 electric“push-pull”trains,as well as their maintenance over 15 years.The estimated value of the contract isaround BGN 1.2 billion(610 million).Procedural backgroundThe Foreign Subsidies Regulation(FSR)started to apply on 12 July 2023.This new set of rulesenables the Commission to address distortions caused by foreign subsidies,and thereby allows theEU to ensure a level playing field for all companies operating in the internal market while remainingEuropean Commissions press release on the first in-depth investigation under the Foreign Subsidies Regulation03.International Affairs47 In February 2024,the first ever in-depth investigation under the FSR was opened by the European Commission against CRRC concerning a public procurement procedure launched by Bulgarias Ministry of Transport and Communications.This was related to the provision of several electric“push-pull”trains,as well as related maintenance and staff training services.This resulted in the withdrawal from the procedure by CRRC.UNIFE welcomed this outcome but also highlights the need to tackle circumvention risks(e.g.with projects below the notification threshold).UNIFE also participated in a number of public events to raise awareness of the main issues related to the European Rail Supply Industry,including in the FDI Regimes&Foreign Subsidies Regulation 2024 conference organised by CompLaw on 14 May.UNIFE and its members will keep monitoring its implementation and full application,especially in view of a revision of the Regulation planned for 2026.Jonathan Nguyen(Head of Public Affairs)participating in a panel of the FDI Regimes&Foreign Subsidies Regulation 2024 conference organised by CompLaw on 14 May48UNIFE Annual Report 20245.Carbon Border Adjustment Mechanism Throughout 2024,UNIFE and its trade alliance AEGIS Europe have been active in the implementation process of the Carbon Border Adjustment Mechanism(CBAM).The law was adopted by the co-legislators in 2023,with application beginning later that year.The CBAM is now under its transitional period until December 2025,during which economic operators are requested to submit reports to the European Commission in regards to emissions embedded in their imports,subject to the mechanism without paying any financial adjustment.The full CBAM deployment will take place early 2026.UNIFE has been emphasising its support of the stated objective to establish a level-playing field on carbon content and to avoid carbon leakage,but has also highlighted the significant risks for the competitiveness of downstream industries,such as the rail supply industry.This is why-with the European Commission set to present by end of 2025 an impact assessment-UNIFE consulted its member companies.The outcome of the exchanges has been inputted into a position paper in November 2024,requesting the extension of the scope of the CBAM to wheels,axles and wheelsets which due to their composition,ought to have a robust methodology for accounting for the carbon emissions generated during their production.In its first phase,the CBAM will focus on goods most at the risk of carbon leakage:03.International Affairs49 6.EUs Foreign Direct Investment Screening RegulationThe EUs Foreign Direct Investment(FDI)Screening Regulation was adopted in 2019 as a means to foster Member States to further evaluate foreign investments/non-EU related to security and public order,particularly when it comes to critical infrastructure.This Regulation is of particular importance for the European Rail Supply Industry since over the past years,the foreign direct investment has significantly increased,and the rail sector has been identified by several countries as a strategic sector.In January 2024,the European Commission made a proposal to revise the Regulation and further strengthen the protection of EU security and public order.This legislative proposal builds on the experience gained by the Commission and Member States with reviewing over 1,200 FDI transactions notified by Member States over the previous three years under the existing Regulation.It also builds on an extensive evaluation of the current Regulation.It proposes to address existing shortcomings and improves the efficiency of the system by ensuring that all Member States have a screening mechanism in place,with better harmonised national rules;by identifying minimum sectoral scope where all Member States must screen foreign investments;and by extending EU screening to investments by EU investors that are ultimately controlled by individuals or businesses from a non-EU country.Against this background,UNIFE drafted a position paper on the Commissions proposal in April 2024.The position paper strongly supported the direction of the revision proposed by the European Commission,but insisted on the need to further increase the scope of screening mechanisms,in particular when it comes to Annex I(EU programmes and projects)and Annex II(sectors and items).With the new institutions in place and active in the last trimester of the year,UNIFE successfully conveyed these messages to the European Parliament-in particular to the INTA and TRAN Committees.UNIFEs feedback on the European Commisssions Proposal for a Regulation on the Screening of Foreign Investments in the Union and repealing Regulation(EU)2019/45250UNIFE Annual Report 20247.Bilateral cooperation with third countriesBilateral cooperation with third countries remains one of UNIFEs priorities.Throughout 2024,and particularly during InnoTrans,UNIFE had the opportunity to exchange and meet with several partners across the globe.a.Western BalkansUNIFE continued to strengthen its relations with the Transport Community Secretariat of the Western Balkans.In this sense,two important events are worth highlighting.UNIFE Director General Enno Wiebe and Matej Zakonjsek,Director General of the Permanent Secretariat of the Transport Community of the Western Balkans,held a constructive meeting on 12 July to identify mutually beneficial areas of cooperation for both regional partners of the Western Balkans and European rail suppliers.The two organisations identified three key topics-the rail technical framework with the upcoming revision of the TSIs(including also within the OTIF framework),public procurement practices(including by promoting the MEAT principle),and market openings in the Western Balkans region.Furthermore,UNIFE deepened these exchanges with the Transport Community and the Infrastructure Managers of Albania,Montenegro,Macedonia and Kosovo,in a dedicated event at UNIFEs InnoTrans stand on 24 September.The objective was to consider further sustainable and resilient rail investments.Such investments must ensure a successful extension of the TEN-T Network,for which the application and guidance of the MEAT principle will be key to deliver quality investments.Western Balkans and Europe:Sustainable and resilient rail investments for a successful extension of the TEN-T Network session(InnoTrans 2024)03.International Affairs51 b.United StatesIn September,with the occasion of InnoTrans,UNIFE organised several activities to introduce the new UNIFE Director General to our US partners,and to discuss how to deepen the cooperation with them.In particular,UNIFE organised the session North America and Europe:The common challenges and opportunities of rail supply industries at its stand on 25 September.The panel featured the US Railway Supply Institute,which is UNIFEs counterpart in the US.Discussions focused on rail market developments,public procurement or skills.Additionally,UNIFE organised bilateral meetings with long-standing US partners-the American Public Transportation Association(APTA)and the Federal Railroad Administration(FRA)during InnoTrans.The constructive discussions focused on the market developments on both sides of the Atlantic,on the regulatory framework and on the overall rail supply landscape.North America and Europe:The common challenges and opportunities of rail supply industries(InnoTrans 2024)The UNIFE and Federal Railroad Administration(FRA)teams at their bilateral meeting(InnoTrans 2024)52UNIFE Annual Report 2024c.Gulf CountriesIn May 2024,UNIFE participated in the Middle East Rail conference in Abu Dhabi,where we gave a presentation on the latest developments related to public procurement in the EU.Furthermore,during InnoTrans in September,UNIFE introduced the new UNIFE Director General to partners of the Railways Authority of the Gulf Cooperation Council(GCC).Discussions were held on how to deepen cooperation between UNIFE and the GCC in the framework of the ongoing GCC railway project to connect all six Gulf Cooperation Council member states.03.International Affairs53 UNIFE World Rail Market Study 202404.The tenth edition of the World Rail Market Study(WRMS),conducted for UNIFE by Bain&Company,was unveiled by UNIFE Director General Enno Wiebe on 24 September 2024 during InnoTrans.Published biennially since 2006,the study provides an overview of the market in its current form and a forecast of its future development in different regions and market segments.It also assesses changes in rail market accessibility.The World Rail Market Study has confirmed the global rail supply market grew 2.7%annually between 2021 and 2023,while also projecting a positive forecast for the rest of the decade.In the face of rising geopolitical tensions,the global rail supply market took advantage of growing transport demand and the ongoing green transition,booming to an average annual volume of 201.8 billion(adjusted for inflation).This is up from 176.5 billion,as recorded in the 9th edition of the World Rail Market Study in 2022(covering the years 2019-2021).Between 2021-2023 and 2027-2029,the global market is expected to grow by 3%annually in real terms.By the end of this period,the average market size is expected to expand to 240.8 billion per year.This growth which is forecasted and based on over 10,000 future rail project orders(including greenfield investments,replacements,and modernisation projects)comes in the face of rising protectionism,as accessibility to global markets for the EU rail suppliers on average fell from 60%to 59%for the 2021-2023 period.In the 2021-2023 period,the European Union and the United States deployed large investments to both support economic recoveries in the aftermath of the pandemic,and to accelerate the green transition.The growth in the global rail supply market was largely driven by Western Europe,which grew by 7.3%per year.This growth took place across the entire value chain,with some of the strongest growth areas including EMUs,infrastructure investments for light rail and investments in the ERTMS trackside and onboard systems.Other strong performers included Africa and the Middle East,with a growth rate of 10.2%per year,while Eastern Europe grew 6.8%per year and North America grew 3.8%per year.Prolonged COVID-19 lockdowns,financial challenges among local governments and railway operators caused a 1.2cline per year in Asia Pacific,although it remained the largest region for demand.Total rail supply market 2027-2029 by region and category EUR bn p.a.,in 2023 real values56UNIFE Annual Report 2024During 2021 and 2023,there was substantial global investment in rolling stock(excluding coaches and freight cars).The installed base in this period grew by 5.1%.Positive market development in the rail supply industry is driven by several factors,including urbanisation,digitalisation,and sustainability.These factors enhance the demand for transportation,boost railways competitiveness,and make rail investments a pressing policy priority due to their low environmental footprint.More high-quality information can be found in the full version of the World Rail Market Study 2024,which is available from the DVV Media Shop in both online and physical copy formats.The abstract of the study can be found here.For further information about the 2024 World Rail Market Study(WRMS),please contact UNIFE Public Affairs Manager Carlos CortsinfrastructureEUR 38.1 bnTOTAL MARKET20212023EUR 201.8 bnAVERAGE ANNUAL TOTAL MARKET IN 2023 REAL VALUESrolling stockEUR 63.3 bnservicesEUR 77.1 bnrail controlEUR 22.3 bnturnkey managementEUR 1.1 bn#UNIFEWRMSCMYCMMYCYCMYKAbstract_UNIFE_World_Rail_Market_Study.pdf 1 2025.01.23.17:45:2304.UNIFE World Rail Market Study 202457 Standards and Regulation05.1.Overview.602.2024s key developments in rail standards and regulations.613.UNIFE Technical Working Groups.664.UNITEL:Rail Telecommunication Activities.715.Cybersecurity.73Being the recognised representative body for the European rail supply industry at European level,UNIFE coordinates the contributions and position of its members towards the development of regulations,decisions,guidelines and other documents drafted by the European Union Agency for Railways(ERA)and the European Commission(EC).The UNIFE Standards and Regulation Group(SRG)and its supporting UNIFE technical working groups are platforms for members to influence technical regulationsthatrelatetothe interoperability and safety of the European railway system.UNIFE actively participates in numerous working parties and groups organised by the European institutions to support the drafting of the aforementioned outputs.The SRG plays a pivotal role in coordinating UNIFEs technical stances on the implementation of the EUs Fourth Railway Package(4RP)and the recurring revisions of the Technical Specifications for Interoperability(TSIs).SRG also interacts with other rail associations,such as CER,EIM,UIP and NB-Rail,as well as other stakeholders in Europes rail sector through collaboration in the Group of Representative Bodies(GRB)and the European Standardisation Organisations(ESO)-particularly,CEN and CENELEC-through the Sector Forum Rail(SFR).As an sector representative on both the ERA Management Board and ERA Executive Board,UNIFE Director General Enno Wiebe regularly attends these meetings to express the rail supply industrys position on important topics,such as ERAs annual work programme and ongoing activities supporting the 4RPs implementation i.e.vehicle authorisation.For more information,please contact UNIFE Technical Affairs Manager Nicholas Shrimpton1.Overview60UNIFE Annual Report 2024a.The 2024 EC Request to ERA for the next revisions of the Technical Specifications for InteroperabilityFollowing the conclusion and publication of the 2023 TSI Revision Package(in force since 28 September 2023,the European Commission began consultations towards defining their next TSI revision mandate to the European Union Agency for Railways(ERA).DG MOVE initiated the discussions in the 100th meeting of the Railway Interoperability and Safety Committee(RISC)held 21-22 November 2023.For each TSI,DG MOVE presented a list of potentially relevant topics coming from different sources to be included in the next TSIs.An official consultation process then followed,lasting several rounds in which the member states and sector stakeholders were asked for comments.This took place from December 2023,and concluded in the 102nd meeting of the RISC on 25-26 June 2024,for which UNIFE was exceptionally invited.In terms of scope,UNIFE joined forces with ten of the other railway representative bodies-AERRL,ALLRAIL,CER,EAL,EIM,FEDECRAIL,NB-Rail,UIP,UIRR,and UITP in calling for prioritisation to be given to the on-going enhancements being driven by the Europes Rail Joint Undertaking,with clear added value for the rail sector-namely for ETCS,operational rules harmonisation,FRMCS and the Digital Automatic Coupler(DAC).In August 2024,the final request formally submitted by the European Commission to the European Union Agency for Railways(ERA)for the next rounds of revisions of the Technical Specifications for Interoperability(TSIs).The request sets out a list of 80 actions and topic areas to be covered by the future revisions of the TSIs,with the delivery of the TSI revision recommendations expected by the end of 2026 and the end of 2028 by the ERA Working Parties,with a third recommendation expected after 2030.The work on these revisions of TSIs has now formally begun,led by the ERA and their TSI Working Parties.UNIFE will contribute actively to this revision process with the support of its following committees:Standards and Regulation Group,UNISIG,UNITEL,Freight Committee,Cybersecurity Working Group and UNIRAILINFRA.Establishing and maintaining an efficient technical framework is key for the European rail supply industry,as we balance our shared goals of increasing the competitiveness and market share of rail transport,supporting the European Green Deal and strengthening the competitiveness of the European rail supply industry.For more information,please contact UNIFE Technical Affairs Manager Nicholas Shrimpton 2.2024s key developments in rail standards and regulations05.Standards and Regulation61 b.Implementation of the Fourth Railway Packages Technical PillarThe 4RPs Technical Pillar,comprised of the recast Interoperability and Safety Directives and the ERA Regulation,entered into force in June 2016.Following the transposition of the measures by EU Member States,the Technical Pillar and its new vehicle authorisation regime entered into operation on 16 June 2019,and has been in force since 31 October 2020 in all Member States.Our association strongly supported the Technical Pillars adoption,which we see as of paramount importance for the rail industrys competitiveness,as it aims to remove the remaining technical barriers to the creation of a Single European Rail Area(SERA).A harmonised European authorisation process run by ERA should see a convergence and greater certainty of requirements,leading to a more consistent,quicker and cheaper vehicle authorisation process with less duplication of checks and testing.Since 16 June 2019,ERA has acted as a European authorising entity and delivered over 7600 vehicle authorisation decisions-representing over 86,000 authorised rail vehicles.With now over five years of experience in operation,the time has come to review the new processes based on the feedback and return of experience of UNIFE members.Together with all stakeholders from the railway sector and the National Safety Authorities(NSAs),activities have been launched to review the newly implemented system and define recommendations from all involved stakeholders on how to optimise the new processes and achieve the targeted cost and time saving goals.This review is led by 4RP Steering Group and the newly established ERA Working Party on Vehicle Authorisation,both of which UNIFE is member and has provided the feedback from the European rail supply industry.These activities are followed closely by the UNIFE Vehicle Authorisation Mirror Group,as the key UNIFE group to exchange on the 4RP authorisation process.For more information,please contact UNIFE Technical Affairs Manager Nicholas ShrimptonVehicle authorisation harmonisation under Fourth Railway Package(Source ERA)62UNIFE Annual Report 2024c.European Commission Expert Group on the Technical Pillar of the Fourth Railway Package UNIFE is a permanent member of the ECs Expert Group on the Technical Pillar of the Fourth Railway Package,alongside Member State and other official sectoral representative bodies.This group is intended to consult the sector on legislation to be voted on,give recommendations on draft texts and help prepare discussions and votes in the Railway Interoperability and Safety Committee(RISC).This Expert Group is intended to complement-but not replace-the RISC,which only allows Member State representatives to vote on the final Implementing Acts.Four meetings of the EC Expert Group on the Fourth Railway Package were held in 2024,two focused on the European Commissions consultation on the 2024 EC Request for the TSI Revisions,and two meetings focused on the Commissions revision of the TSI regarding telematic applications.For more information,please contact UNIFE Technical Affairs Manager Nicholas Shrimptond.UNIFE High-Level Dialogue with DG MOVE,ERA and Europes Rail Joint Undertaking In recent years,UNIFE has established a high-level dialogue between the European Commission(DG MOVEs Directorate C),ERA and Europes Rail Joint Undertaking management teams and UNIFE Strategy Committee members at the CTO level.This high-level forum continued in 2024 under the leadership of the new UNIFE Director General Enno Wiebe.Discussions covered both political items,such as the new European Commission and its outlook impacting the rail industry,and technical items,addressing blocking points in several key areas such as FRMCS,DAC,the 4RP vehicle authorisation process and the future TSI economic impact assessments.This forum provides a unique opportunity to exchange with the directors of our EU institutional partners,escalate key items needing resolution and align on actions to continue the positive cooperation between the European rail supply industry and EU bodies.For more information,please contact UNIFE Technical Affairs Manager Nicholas ShrimptonHigh-level Dialogue between European Commissions DG MOVE,European Union Agency for Railways,Europes Rail Joint Undertaking,and UNIFEs Management and Strategy Committee members05.Standards and Regulation63 e.Cooperation with the Group of Representative Bodies(GRB)As the official representative body for the European rail supply industry,UNIFE is a member of the Group of Representative Bodies(GRB).The GRB is a group of European railway associations tasked with supporting the sectors consultations with the European Union Agency for Railways(ERA),as it undertakes its work programme and its activities on rail safety and interoperability.The GRB has continued to be h
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E-bikes:Charging Toward Compact Cycling CitiesACKNOWLEDGEMENTSAUTHORS:Dana Yanocha ITDPJonas Hagen Independent ConsultantResearch and drafting support provided by Evelyn YuenCOVER PHOTO:It is common to find electric and mechanical bicycles on Bogots bicycle lanes during rush hour.SOURCE:ITDPEXPERTS INTERVIEWED:The authors thank the following experts who generously provided their time and insights during the interview phase,which strengthened the quality of this report.Benjamin Hategekimana ITDP AfricaDanielle Hoppe ITDP BrazilShanshan Li ITDP ChinaQiuyang Lu ITDP ChinaMega Primatama ITDP IndonesiaCiptaghani Antasaputra ITDP IndonesiaSyifa Maudini ITDP IndonesiaDeliani Siregar ITDP IndonesiaPhilip Amaral European Cyclists Federation(ECF)Noa Banayan PeopleForBikes (formerly)Jules Flynn Zoomo ITDP BoardDaniel Guth Aliana BikeJustine Lee ITDP BoardMichael Linke Independent ConsultantMike Salisbury Denver Office of Climate Action,Sustainability,and Resiliency(CASR)Caroline Samponaro LyftSeble Samuel Transport Decarbonization Alliance and ITDP BoardSonal Shah The Urban CatalystsTejus Shankar LyftCeri Woolsgrove European Cyclists Federation(ECF)Published March 2024Support for this report was generously provided by Climateworks Foundation.REVIEWERSCiptaghani Antasaputra ITDP IndonesiaBernardo Baranda ITDP MexicoShelley Bontje Dutch Cycling EmbassyJules Flynn Zoomo ITDP BoardCamila Herrero C40 RodriguezDanielle Hoppe ITDP BrazilChris Kost ITDP AfricaJacob Mason ITDP GlobalLarry Pizzi Alta Cycling GroupAshley Seaward PeopleForBikesTejus Shankar LyftDeliani Siregar ITDP IndonesiaAV Venugopal ITDP IndiaLi Wei ITDP ChinaJonathan Weinert 2 Billion Bikes FoundationCeri Woolsgrove European Cyclists Federation(ECF)CONTENTSE-BIKES:CHARGING TOWARD COMPACT CYCLING CITIESI.INTRODUCTION4Unlocking the Potential of E-Bikes for Climate,Equity,and Access in Cities Integration with the Built Environment Potential for Carbon Reductions Improving Access and Equity Stimulating Economic Opportunities A Growing Market8 Context for this ReportII.WHAT IS AN E-BIKE?Defining E-Bikes Classification of E-Bikes Around the WorldFostering E-Bikes in Indonesia,a Nascent MarketCreating Clarity in Brazil,an Emerging MarketThree Classes of E-bikes in the United States,an Emerging MarketRefining E-Bike Classifications in China,a Developed Market14III.WHAT IMPACTS CAN E-BIKES DELIVER?Climate Impacts Decarbonizing the Transport Sector by Replacing Car Trips Estimating the Climate Impacts of a Large-Scale Global Shift to E-Bikes Access ImpactsExpanding Access to Affordable,Clean TransportationProviding Alternatives for Underserved Groups Economic ImpactsProviding Economic Opportunity for Delivery WorkersUnlocking Domestic ManufacturingIV.SEVEN KEY BARRIERS TO E-BIKE UPTAKE23V.RECOMMENDATIONS TO SUPPORT E-BIKE UPTAKE284I.INTRODUCTIONUnlocking the Potential of E-Bikes for Climate,Equity,and Access in CitiesElectric bicycles(e-bikes)are vastly popular with their owners,and their use is growing by leaps and bounds around the world.For the purposes of this report,we define e-bikes as electrically powered two-and three-wheeled cycles that are compatible in terms of size and maximum speed with conventional(nonmotorized)bicycles.Our definition of e-bikes does not include electric scooters or motorcycles(see Section II for a more complete definition).E-bikes have multiple positive impacts for the climate and access(see Section III),especiallywhen used in place of private vehicles like cars and motorcycles:Integration with the Built EnvironmentE-bikes are cleaner,quieter,and more space-efficient,and they integrate better into citystreets than cars and internal combustion engine(ICE)two-wheelers.They have the potentialto provide excellent mobility optionsfor people in cities,and for those living in more periph-eral urban and even rural areas too.Potential for Carbon ReductionsThe potential for e-bikes to replace automobile(and,to some extent,ICE two-wheeler)trips is greater than for traditional bicycles,with electric motors reducing the challenges of hills,hot weather,and longer distances.E-bikes can also greatly expand the share of potential users of public transport,leading to further emissions reductions.This makes e-bikes a key piece in the puzzle of reducing carbon emissions from urban transport.Improving Access and EquityE-bikes have the potential to improve access to destinations particularly for historicallyunderserved groups,including women,the elderly,and low-income populations given theirlow cost(relative to cars)and ease of use.Shared e-bikes as part of bikeshare systems are alsobeing used at much higher rates compared to conventional bikeshare bicycles.SOURCE:City of Durham NCvia Flickr5Stimulating Economic OpportunitiesThe domestic production of e-bikes is an opportunity for countries to stimulate both manu-facturing and downstream jobs as a result of increased demand for e-bikes,such as in bicycle retail and mechanics.Further,e-bikes used in commercial applications provide a source of income and economic opportunity for bicycle delivery workers.A Growing Market In 2022,the global market for e-bikes was valued at USD$37.5 billion,or about 15%of the global market for all electric vehicles(valued at USD$246.7 billion in 2020).1 With demand for e-bikes growing rapidly in many regions,the global market is expected to increase to$119.7 billion by 2030,with an annual growth rate of 15%(total growth of 220%).2 Many countries in-cluding Japan,Brazil,the US,Australia are experiencing rapid growth in demand for e-bikes.In the US,for example,the number of imported e-bikes increased from 25,000 in 2019(pre-pan-demic demand)to 463,000 units in 2020 and 790,000 in 2021 an increase of more than 3,000%from 2019 to 2021.In the US,e-bike imports were higher than electric car and truck imports in 2020(463,000 e-bikes versus 325,000 electric cars and trucks)and 2021(790,000 e-bikes versus 652,000 electric cars and trucks).3 E-Bike Growth by Region 202020254 Fortune Business Insights.(May 2023).“Electric Bike Market Growth&Trends|Industry Analysis 2030.”Fortune Business Insights.(May 2023).“Electric Bike Market Growth&Trends|Industry Analysis 2030.”North American Bikeshare and Scootershare Association.(August 2022).3rd Annual Shared Micromobility State of the Industry Report 2021 eBicycles(January 2024),Useful Facts&Stats of E-Bikes;Alexandru Arba(June 2023),Sales volume of electric power-assist(pede-lecs)bicycles in Japan from 2011 to 2020;Aliana Bike(April 2023),https:/aliancabike.org.br/mercado-eletricas-2023/;Confedera-tion of European Bicycle Industry(July 2022),Bicycle and E-Bike Sales Continue to Grow,Reaching Record Levels;PeopleForBikes(May 2023),Electric Bicycle Incentive Toolkit;Blueweave Consulting(September 2022),India Electric Bicycle(E-Bike)Marketby Propulsion Type(Pedal-Assist,Throttle);By Battery Type(Lead Acid,Lithium-Ion,Nickel Metal Hydride,Others);By Region(North India,East India,West India,South India),Trend Analysis,Competitive Landscape,Market Share&Forecast,20182028;ITDP India(June 2022),Status of E-Micro Mobility in India;iResearch Consultants(August 2022),Chinas Two-Wheeled Electric Vehicle Industry White Paper 2022.SOURCE:City of Durham NCvia FlickrEuropean Union$2,2005,000,000India$240-$1,80091,142Japan$500-$1,000737,740United States$2,600 525,000Brazil$1,36944,833China$3004,670,000LOWMEDIUMHIGHGrowth of E-Bike MarketCountryAverage E-Bike Cost(USD)#E-Bike Sales/Year6The largest existing market for e-bikes is China,with more than 183 million e-bikes in urban areas5 and a reported 350 million e-bikes countrywide in 2021.6 The prevalence of e-bikes in China can be attributed to a variety of factors,including:1)bans on motorcycles implement-ed in the late 1990s,2)challenges associated with acquiring motorcycle licenses,3)relatively short travel distances in Chinese cities,and 4)affordability of e-bikes.E-bikes became a pop-ular replacement for motorcycles after major Chinese cities banned motorcycle licensing and use in the early 2000s.7 As a result,e-bikes in China are more visually similar to mopeds than bicycles,though their weight and power align with low-speed e-bikes.Many relatively low-cost e-bike options(low-end models start at around USD$300)are available,too.Chinese cities have also expanded investments in cycle infrastructure over the past decade,providing safe and comfortable travel spaces for e-bike riders.Overall,the projected global growth in the e-bike market in the coming years represents an op-portunity for local manufacturing and assembly.Although most e-bikes are currently produced in China and the EU,companies in other countries,including the US,India,Indonesia,Brazil,Mexico,and Kenya,are beginning to produce e-bikes.Context for This ReportWhile e-bikes are growing in popularity,it is also relatively early days in the development of this technology.Local,regional,and national governments are grappling with ways to integrate e-bikes into transportation networks in cities and in peri-urban and rural areas.Many coun-tries and cities have not yet clearly defined what e-bikes are,what quality standards they must meet,and/or where they can be used.This lack of clarity has led to safety concerns around conflicts between people on e-bikes and other street users,deadly e-bike battery fires,and other challenges.To avoid these regulatory confusions,governments must engage the topic.However,we recognize that there is no single“best”way to regulate e-bikes and introduce them into local markets,so governments must work to develop the solutions that work best in their context.Recognizing this pivotal moment in the trajectory of global e-bike uptake,this report aims to define e-bikes and evaluate how and where they are currently being used,the benefits e-bikes can deliver,factors preventing more widespread adoption,and how cities and national govern-ments can respond.As part of this broader goal,the report has two main objectives:1)to showcase how e-bikes can contribute to climate-friendly,livable,equitable cities by reducing carbon emissions and ITDP.(December 2021).The Compact City ScenarioElectrified.Xu Bing,China News Shanghai.(June 18,2023).奔赴赛道，中国两轮电动车行业满足消费者多元需求-中新社上海 Heading for the track,Chinas two-wheeled electric vehicle industry meets diversified consumer demands.”Guo et al.(2020).Personal and societal impacts of motorcycle ban policy on motorcyclists home-to-work morning commute in China.A family rides anelectric bicycle alonga downtown street inBeijing.SOURCE:1000 Words viaShutterstock72)to provide guidance to municipal,regional,and national governments on how to encourage and integrate e-bikes into existing transport networks.We draw on existing research as well as lessons learned from government and private-sector successes and shortcomings from around the world.The report relies heavily on data gathered from 14 interviews with e-bike experts who work in nine countries across six continents,in-cluding ITDP staff and external consultants.Notably,this report aims to evaluate the use and potential impacts of e-bikes separate from trips made by ICE two-wheelers(such as mopeds or motorcycles).E-bikes and two-wheelers are often conflated despite important differences in their use,requirements for safe oper-ation,and purchase price.Cities and countries where two-wheelers are prevalent have faced particular challenges to adopting e-bikes(see Section IV).As the global e-bike market grows and a larger range of e-bike types becomes available,using them to replace ICE two-wheelers will likely become more competitive.Importantly,strategies to electrify two-wheeler fleets should include encouragement of modal shift to e-bikes.8II.WHAT IS AN E-BIKE?Defining E-bikesE-bikes are electrically powered two-and three-wheeled cycles that are compatible in terms of size and maximum speed with conventional(non-motorized)bicycles.E-bikes come in vari-ous forms and serve multiple functions,including transporting passengers and goods.The ma-jor types currently on the market are detailed in Table 1.Notably,we do not consider e-mopeds and e-motorcycles without pedals and with maximum speeds above 45 kph(e-motorcycles can typically travel even faster)to be e-bikes.Table 1:What is an e-bike?As a first step to understanding how e-bikes are being used and what their potential can be,this report will primarily focus on low-speed e-bikes,including ecargo cycles(see Highlight Box 1),where the electric assist shuts off when a maximum speed of about 25 kph(or up to 15 mph)is reached.Because the motor power is low(generally 250 watts or less),low-speed e-bikes function similarly to a conventional bicycle8 even when the electric assist is activated.This report occasionally references,but does not focus on,medium-speed e-bikes and speed pedelecs,though we do consider these to be e-bikes.In this report,the authors use the terms“conventional”and“traditional”interchangeably to refer to bicycles that do not have motors.TypeMaximum speed before assist shutoffAssist provided byE-bikesCompatible with conventional bicycles in cycle lanesLow-speed e-bikes25 kphPedal assist or throttleEcargo cycles25 kphPedal assist or throttleMedium-speed e-bikes32 kphPedal assist or throttleShould not be ridden in cycle lanesSpeed pedelecs45 kphPedal assistNot e-bikesE-mopedsNo speed limiter(top speed 50 kph )Throttle onlyE-motorcyclesNo speed limiter(top speed 80 kph )Throttle only9E-cargo cycle used by the German postal service in Munich.SOURCE:Anne Czichos via ShutterstockBOX 1:TYPES OF E-CARGO CYCLESElectric cargo cycles serve as a last-mile solution for urban freight as well as to transport passengers and goods by private users,and they have great potential to substitute for vehicle trips in these contexts.Compared to standard electric bicycles,ecargo cycles have a larger carrying capacity and higher power output.Ecargo cycles are used by prominent couriers such as Amazon,UPS,DHL,and Germanys postal service(Deutsche Post)in place of cars and light-duty trucks.Freight deliveries are trending toward smaller packages,with increased demand for tighter delivery time windows and same-day delivery.This trend makes ecargo cycles increasingly attractive to replace cars and light commercial vehicles for urban freight delivery.9 Another advantage of ecargo cycles is their ability to use cycle lanes when streets are congested,thereby saving time.This was the case for the operator of New York Citys public bikeshare system,which started using ecargo cycles to transport bicycles around the citys busiest streets,as vans performing the same task were frequently caught in traffic.10Researchers have found that 19%to 48%of courier trips made by autos could be replaced by ecargo cycles.11 The CO2 reductions from a large-scale shift to ecargo cycles for freight would be dramatic:Case studies from Porto(Portugal),12 the Netherlands,13 and So Paulo(Brazil)14 have found CO2 reductions of 73%,80%,and 90%,respectively,when shifting delivery services from autos to ecargo cycles.In a growing number of places,personal ecargo cycles are used in place of cars to transport groceries,large-volume objects,and additional passengers.A program in Germany and Austria made cargo cycles(electric and conventional)available for free for more than 9,750 users,and a survey indicated that about half of participants(46%)substituted their car trips with the shared cargo cycles.159 Rudolph,C.,&Gruber,J.(September 2017),“Cargo cycles in commercial transport:Potentials,constraints,and recommendations,”Research in Transportation Business&Management,24,2636.10 Lyft,Inc.,2022,How Were Rebalancing the Citi Bike System.11 Gruber,Johannes,Verena Ehrler,&Barbara Lenz.(2013).“Technical potential and user requirements for the implementation of electric cargo bikes in courier logistics services.”13th World Conference on Transport Research(WCTR).12 Melo,S.,Baptista,P.(2017).“Evaluating the impacts of using cargo cycles on urban logistics:integrating traffic,environmental and operational boundaries.”13 Moolenburgh,E.,van Duin,R.,Balm,S.,Altenburg,M.,&van Ploos Amstel,W.(2020).“Logistics concepts for light electric freight vehicles:A multiple case study from the Netherlands.”14 Ormond Junior,P.A.,Telhada,J.,&Afonso,P.(December 2018).“Evaluating the Economic and Environmental Impact of the Urban Goods Distribution by Cargo Cycles a Case Study in Sao Paulo City.”15 Becker,S.,&Rudolf,C.(2018).Exploring the potential of free cargo-bikesharing for sustainable mobility.Delivery bikeLong john bikeFront load tricycleHeavy-load tricycleLongtail bike10Classification of E-bikes Around the WorldWhile demand for e-bikes is growing globally,the regional realities of access to,perception of,and use of e-bikes differ considerably.Classification and regulation of e-bikes also varies from country to country(and,in some cases,within countries),which heavily influences how e-bikes are produced and sold(see Appendix I for more).There is also a wide range of contexts that cities and countries are experiencing with regards to e-bike use.Nascent markets,like Indonesia,Rwanda,and South Africa,have a very small market share of e-bikes.16 In some nascent markets,e-bikes may be primarily used by rec-reational cyclists,for example,people using e-mountain bikes.In South Africa,most of the demand for e-bikes comes from wealthy mountain bike riders purchasing high-end e-bikes to ride on trails,not for everyday transportation.17 In such places,a clear definition and classifi-cation for e-bikes may not be available because supply and use is so limited.Fostering E-bikes in Indonesia,a Nascent MarketMost trips in Jakarta and other major cities in Indonesia are completed using ICE two-wheelers.Cheaper and easier to maneuver and park than private cars,ICE two-wheelers dominate streets,causing traffic congestion,air and noise pollution,and road safety challenges.The e-bike market in Indonesia is very nascent,however political will exists for transport electrification broadly-the president of Indonesia is interested in accelerating electrification and supports efforts like financial incentives to purchase electric two-wheelers and electric cars.In 2021,the Indonesian Ministry of Transportation(MoT)sought to regulate micromobil-ity in the country,implementing a regulation(PM45-2020)to address the gap between existing regulations and the new micromobility products on the market.However,the regulation has been poorly enforced,and safety issues have occurred when two-wheel-er users encroach in bicycle lanes designed for low speed e-bikes and conventional bicycles.Further,circumventing the regulation by modifying lower-speed e-bikes to increase maximum speeds from 25 kph to up to 40 kph,making them incompatible with conventional bicycles,is common.The MoT has not released a clear definition of e-bikes,and how they differ from electric(and ICE)two-wheelers.Because the e-bike market is so new,supply is limited,and it is more expensive to purchase an e-bike compared to an ICE two-wheeler due to the mature market for ICE two-wheelers.This has limited uptake of e-bikes in Indonesia.The government subsidizes electric two-wheelers and electric cars,but not e-bikes.This makes it more challenging to purchase an e-bike compared to other electric vehicles.In several major Indonesian cities including Jakarta,Semarang,and Surabaya,bikeshare operators have expressed interest in providing low-speed e-bikes as part of their fleets.This is an important step in building public awareness around e-bikes and the types of trips they can service.Clear classification of e-bikes and their ability to safely use cycle lanes will be important to support and grow shared as well as personal e-bike use.In emerging e-bike markets like Brazil and the United States,where the supply of e-bikes is larger and use is more prevalent than in nascent markets,unclear classifications for e-bikes can pose significant challenges for regulators,retailers,and users.In these cases,unclear classification can inhibit growth of the e-bike industry by creating confusion,especially among potential users.E-bike users may be unsure whether they need a license,registration,and in-surance to operate an e-bike,and about where on the street e-bikes can be ridden.16 ITDP Indonesia,(May 17,2023),video interview by author;Benjamin Hategekimana(ITDP Africa),(June 1,2023),video interview by author;Michael Linke,(May 2,2023),video interview by author.17 Michael Linke.(May 2,2023).Video interview by author.ICE two-wheelers are popular across Indonesia,which has limited the uptake of e-bikes.SOURCE:ITDP Indonesia11Creating Clarity in Brazil,an Emerging MarketIn recent years,the market for micromobility modes has grown in Brazil,with a large range of new vehicle types becoming available.An array of e-bikes,e-scooters,and electric two-wheelers were being imported and sold without adequate vehicle classi-fications and approvals.Some retailers misrepresented e-mopeds to customers,tell-ing them the vehicles they were buying were legal to use in cycle lanes and would not require a license or registration to use.This contributed to a diverse array of electric two-wheelers,including higher-speed e-mopeds,using cycle lanes and causing frequent conflicts with pedal cyclists and pedestrians.Even transportation authorities and police were not well-informed about the differenc-es and whether these new vehicles were legally allowed to circulate in cycle lanes.18 This eventually led to the broad apprehension of e-mopeds,e-motorcycles,and e-bikes in So Paulo and Rio de Janeiro because they were circulating without license plates and users did not have drivers licenses.In the city of So Paulo,police apprehended 100 electric two-wheelers in the first four months of 2022.19This lack of legal clarity led cycling interest groups to advocate for a new national law that classified e-bikes separately from higher-speed e-mopeds.This law was meant to address the large array of new vehicle types that were already circulating in Brazilian cities and to facilitate registration and licensing for higher-speed vehicles with local traffic authorities.The new regulation was implemented in July 2023,and it updated the classification of e-motorcycles and e-bikes.E-bikes now have the same registration requirements and rights to street infrastructure as bicycles,must be pedal-assist with a maximum speed of 32 kph(previously 25 kph),and have a motor power of 350 watts to 1,000 watts.The new law aims to provide clarity for authorities and consumers.Notably,the law addresses the difference between vehicle maximum speeds and local speed limits.Ac-cording to Brazilian legislation,local traffic authorities,not federal legislation,define speed limits.Therefore,the increased 32 kph maximum speed applies to the vehicles capability and not to the speed limit on the street where the vehicle is being ridden.Despite attempts at clarity,the new legislation has faced some criticism,particularly for permitting moderate speeds for e-bikes(32 kph)and allowing small e-mopeds in the self-propelled category to circulate on sidewalks(up to 6 kph)unless prohibited by local authorities.2018 Daniel Guth(Aliana Bike).(June 1,2023).Video interview by author.19 William Cardoso.(May 20,2022).Motos eltricas so apreendidas em blitze e proibidas nas ciclovias de So Paulo.20 Marcos de Souza.(June 26,2023).32 km/h no demais para uma bike na cidade?Before a recent regulation was adopted in Brazil,a lack of clarity about what can be categorized as an e-bike led to mopeds using cycle lanes,causing conflicts with lower speed e-bike and pedal bicycle riders.SOURCE:ITDP Brazil12Three Classes of E-bikes in the United States,an Emerging MarketIn the United States,a federal definition adopted in 2002 states that an electric bicycle is a“two-or three-wheeled vehicle with fully operable pedals and an electric motor of less than 750 watts,whose maximum speedis less than 20 mph 32 kph”(2002 Public Law 107-310).This definition does not specify where on the road e-bikes are permitted,since state laws typically govern rules of the road.Therefore,individual state motor vehicle codes must define e-bikes and identify where and how they can be used.The vast majority(48 of 50)of state motor vehicle codes use a more detailed three-class definition based on speed and how the electric assist is delivered to identify which types of e-bikes are permitted to use bicycle infrastructure.All three classes are considered bicycles and do not require a license or registration.Class 1 and Class 2 e-bikes have a maximum speed of 20 mph,while Class 3 e-bikes can reach 28 mph(45 kph).Class 2 e-bikes have a throttle,while Class 1 and Class 3 are only pedal-assist.The two states that do not use the three-class system,Alaska and Rhode Island,define e-bikes more closely to that of a motorized vehicle than a bicycle,which can mean a license,insurance,and registration are required.Finally,China and countries in the European Union(such as Germany,Switzerland,and Sweden)have developed e-bike markets.In these markets,supply and access to e-bikes is widespread and they have a clear definition in vehicle regulations.In the EU,e-bikes are defined as ex-clusively pedal-assist,with power cutting out at 25 kph.21 In China,e-bikes can be either ped-al-assist or throttle-powered,with a maximum speed of 25 kph,and they must have operable pedals.2221 Association Franaise de Normalisation.(January 2009).Cycles Electrically Power Assisted Cycles-EPAC Bicycles.22 Government of the Peoples Republic of China.(September 6,2021).“电动自行车安全技术规范Safety Technical Code for Electric Bicycles（GB17761-2018）国家标准解读.”http:/ cycles built to carry additional passengers can substitute for cars.Source:Waltarrrrr,flickr13Refining E-bike Classifications in China,a Developed MarketWith clear definitions and strong national laws guiding the use of e-bikes,China has one of the most established e-bike markets.China has had a strong cycling culture since the last century.This facilitated the continual refinement of cycling policies,including a national standard for e-bikes that was enacted in 1999.In 2018,a set of new National Standards on Electric Bicycles fine-tuned the definition of electric bicycles,strictly rec-ognizing pedal-assisted e-bikes as bicycles but also adding tamper-proof and fireproof requirements.Although subnational governments in China have comparatively less au-thority to define e-bikes,these governments help enforce the standards established by the national government.Provincial governments regulate parking and charging of elec-tric bicycles,while county governments fund law enforcement,emergency response,and administrative management of electric bicycles.In March 2023,policymakers submitted a proposal to update the 2018 National Stan-dards for Electric Bicycles to better accommodate e-bikes used in deliveries.E-bikes are widely used across China for delivery and courier purposes.The new proposal address-es the regulation of ecargo cycles,calling for the existing standards to include a larger battery capacity and maximum loading weight.It also suggests the implementation of a smart system to prevent ecargo cycle modifications that circumvent the regulation,a practice commonly seen with personal e-bikes as well.The proposal also aims to in-clude a system to register ecargo cycles used for commercial deliveries so that they can be more easily monitored for safety and compliance.Pedal assist e-bikes are defined as bicycles in the Chinese National Standards on Electric Bicycles.SOURCE:Alpha from Melbourne,Australia,via Wikimedia Commons14III.WHAT IMPACTS CAN E-BIKES DELIVER?Like conventional bicycles,e-bikes currently account for a relatively small share of trips in most countries.However,the potential benefits they present,especially with a large-scale growth in ridership,are significant.E-bikes can contribute to climate goals by shifting trips away from high-polluting ICE cars and two-wheelers;improve equity by expanding access to affordable,clean transportation,especially for women and low-income populations;and create domestic economic opportunities.Climate ImpactsDecarbonizing the Transport Sector by Replacing Car TripsExperts agree that keeping global warming below 1.5C is critical to avoiding the most serious and catastrophic impacts of climate change.Greenhouse gas(GHG)emissions from transport account for 24%of the worlds total energy-related GHG emissions.Fueled by rapid urbaniza-tion and motorization in developing countries,this could increase by 60%by 2050.23Given this challenge,practitioners in the urban transportation sector are pursuing multiple avenues to decarbonize.Research and modeling conducted by ITDP and UC Davis show that both compact cities developed for walking,cycling,and public transit and a rapid and strategic transition to electric vehicles are needed to cut GHG emissions from urban transport by 50%by 2050,in line with a 1.5C scenario.24E-bikes can play a critical role in this transition as substitutes for automobiles for many types of trips because they can serve relatively long trip distances.25 This is especially important in areas where average trip distances are longer,including in large cities,low-density areas,and peripheral urban zones(see Highlight Box 2).Studies have also shown that increasing cycling leads to a decrease in the frequency of car driving.In some cases,e-bike use resulted in im-pressive reductions of car trips,ranging from 25%to 60%.26 E-bikes also provide a more com-fortable ride for users while cycling up hills,in warm climates,and when carrying additional passengers or goods,all trips that might otherwise be made with an automobile.23 World Bank.(2023).“Global Facility to Decarbonize Transport(GFDT).”24 Lewis Fulton&D.Taylor Reich.(December 2021).The Compact City Scenario Electrified.25 Hiselius,L.W.,&Svensson,.(2017).E-bike use in Sweden CO effects due to modal change and municipal promotion strate-gies.Journal of Cleaner Production,141,818824.26 Helga Birgit Bjrnar et al.(July 2019).From Cars to Bikes The Effect of an Intervention Providing Access to Different Bike Types:A Randomized Controlled Trial.Joost De Kruijf et al.(September 2018).Evaluation of an Incentive Program to Stimulate the Shift from Car Commuting to E-Cycling in the Netherlands.15BOX 2:CAN E-BIKES REPLACE VEHICLE TRIPS OUTSIDE OF URBAN AREAS?People in urban peripheral and rural areas often have few transportation options aside from private vehicles because of expensive,infrequent,and/or nonexistent public transport services as well as longer trip distances as a result of lower-density development.E-bikes present a viable solution to improve mobility in lower-density areas because they are better suited for longer trips than conventional bicycles.A study of 10,000 European cyclists reported an average e-bike trip of about 9 km compared to an average conventional bicycle trip of about 5 km.27 A US study estimated average trip lengths of 7.5 km for e-bikes and 5 km for conventional bicycles.28 However,a lack of protected cycle lanes and supportive infrastructure(i.e.,convenient bicycle parking,repair locations,etc.)and limitations presented by inconsistent electricity access and charging infrastructure in rural areas likely present a more difficult environment for e-bike use than in urban contexts.How-ever,in high-income country suburbs,low-speed neighborhood roads could sup-port local e-bike trips,and theft may be less of an issue where space is available to store e-bikes indoors.Studies and interviews conducted for this report highlight the potential of e-bikes for travel outside city limits.On large farms or other agricultural properties,e-bikes are being considered as quieter,cleaner options for moving around the property,substituting for gas-powered utility terrain vehicles.29 In Tanzania,researchers es-timated that e-bikes could save students traveling from rural areas to school up to 80%of commuting time,reducing a four-hour commute to 50 minutes.30 E-bike use is growing in rural areas of the Netherlands,too,where there is a greater opportunity for e-bikes to substitute for car trips and yield emissions reductions than in cities where car ownership is lower.31 In China,rural poverty is closely intertwined with rural immobility,but e-bikes are considered a way for rural residents to access op-portunities beyond those available in rural areas.3227 Alberto Castro et al.(June 2019).Physical activity of electric bicycle users compared to conventional bicycle users and non-cy-clists:Insights based on health and transport data from an online survey in seven European cities.28 Michael McQueen,John MacArthur,&Christopher Cherry.(October 2020).The e-bike potential:Estimating regional e-bike im-pacts on greenhouse gas emissions.29 Noa Banayan(PeopleForBikes).(May 4,2023).Video interview by author.30 Kennedy Aliila Greyson et al.(June 2021).Exploring the Adoption of E-bicycle for Student Mobility in Rural and Urban Areas of Tanzania.31 Michael Jenkins et al.(November 2022).What Do We Know about Pedal-Assist E-Bikes?A Scoping Review to Inform Future Directions.32 Zhao Yu&Pengjun Zhao.(February 2021).“The Factors in Residents Mobility in Rural Towns of China:Car Ownership,Road Infrastructure,and Public Transport Services.E-bikes have the capacity for longer trip distances than traditional bicycles,allowing for the possibility of them replacing private vehicles for local trips.SOURCE:Bad Kleinkirchheim via Flickr16E-bike use has also been directly linked to reductions in vehicle kilometers traveled and related emissions.In North America,using e-bikes for 15%of all miles traveled could result in a 12%reduction in carbon dioxide emissions from transport.33 In Denver,71%of participants in the citys e-bike purchase incentive program reported reducing car trips(see Highlight Box 3).BOX 3:EXPANDING ACCESS TO E-BIKES AS A CLIMATE SOLUTION IN DENVERA citizen-led effort to push for more coordinated action to address climate change at the city level in Denver led to the passage of a ballot measure in 2020 to create a sales taxsupported Climate Protection Fund.Since then,the tax has generated around USD$40 million per year,which the citys Office of Climate Action,Sustainability,and Resilience(CASR)has used to support climate actions across the transport,building,and energy sectors.In 2021,CASR began to look into potential incentive programs for e-bikes in an effort to encourage more people especially low-income residents to pur-chase an e-bike as a way to reduce private vehicle use.The cost of an e-bike had been identified by low-income residents as a significant barrier to purchase and daily use.Because the program was primarily targeting low-income residents,a reimbursement or rebate received after the purchase would not be viable,be-cause many low-income residents would not be able to afford the upfront price,even if they would receive a rebate(partial refund)later.CASR decided to pur-sue a point-of-sale discount,which means that bicycle retail shops would cover the full cost of e-bike purchases through the program until the city reimbursed them.Consultations with local bicycle retailers indicated that they were gener-ally supportive of the program it would increase e-bike sales but were con-cerned about the reimbursement process and the time it would take.Given this feedback,CASR hired a third-party to implement and operate the program in an effort to deliver timely reimbursements to the bicycle shops.33 Michael McQueen,John MacArthur,&Christopher Cherry.(October 2020).The e-bike potential:Estimating regional e-bike im-pacts on greenhouse gas emissions.In Denver,e-bike rebates are coupled with improved bicycle infrastructure in order to incentivize climate friendly transportation options.SOURCE:Lars Plougmann via Flickr17Denvers e-bike voucher program launched in 2022.The point-of-sale voucher can be used to purchase an e-bike or ecargo cycle from any Denver-based bicy-cle retailer,with$400 standard vouchers available for regular e-bikes and$900 vouchers for ecargo cycles.Income-based vouchers provided$1,200 toward the purchase of a regular e-bike and$1,700 toward an ecargo cycle.CASR originally budgeted$300,000 for vouchers,but demand significantly dwarfed that amount more than 1,000 people applied for vouchers in the first few days of the pro-gram.CASR was able to allocate additional funds to support more vouchers,ulti-mately offsetting the purchase of about 4,700 e-bikes in 2022,about half of which were bought by residents using income-qualified vouchers.A survey of users of the e-bike vouchers showed promising climate impacts from the program.E-bike owners reported riding an average of 26 miles(42 kilo-meters)per week,with income-qualified voucher recipients riding slightly more than average,at 32 miles per week.And 71%of respondents reported using their car less often,with the 4,700 e-bikes purchased through the program replac-ing approximately 100,000 vehicle miles traveled per week.Each year,the 4,700 e-bikes will offset approximately 1,450 metric tons of greenhouse gas emissions,or the equivalent of taking more than 300 cars off the road.34The program was renewed for 2023,and demand for e-bike vouchers is well be-yond what CASR can provide.Meanwhile,the city is investing in complementary infrastructure,like protected bicycle lanes,that can support more frequent and longer e-bike trips and greater modal shift away from private vehicles.35Finally,as the share of electricity generated by renewable sources(e.g.,wind and solar)increases around the world,and particularly in low-and middle-income countries,the potential for GHG re-ductions from e-bikes will grow.The promise of inexpensive,clean transportation from e-bikes can also add incentives for the creation of sustainable,consistent electricity supply to areas that cur-rently have inconsistent(or no)supply and/or a GHG-intense electricity supply.Estimating the Climate Impacts of a Large-Scale Global Shift to E-bikesAs outlined above,the emissions-reduction potential from replacing vehicle trips with e-bike trips is high,especially in places where car ownership is high.This is because for most people conventional bicycles are well-suited for trips under 5 kilometers,whereas e-bikes enable riders to cover longer dis-tances(10 km or more)with less physical effort.As such,e-bikes are a useful addition to the active mo-bility fleet,substituting for cars over longer distances compared to conventional bicycles.Using data from The Compact City Scenario Electrified,we can estimate the impact of a large-scale global shift to e-bikes(away from polluting vehicles)by 2050.36 In this high-shift scenario,we assume that cycling,walking,and public transport are the dominant and prioritized modes,supported by sustained funding and street space allocation.Vehicle travel still increases in the years leading up to 2050,albeit at a much slower rate than we currently see year over year.Overall,the share of urban passenger kilometers traveled(PKT)by car would decrease,and part of that decrease would be the result of an increase in e-bike PKT.Using research on ex-isting conditions for e-bike access and use,we can estimate the percentage of the mode shift away from cars that e-bikes would be responsible for in each region and the associated emis-sions reductions(shown in Table 2).Table 2.Projected Impacts of a High Shift to E-bikesCountry/RegionE-bike mode share in 2050Number of e-bikes in use to support shift(millions)Millions of cars taken off the roadMillions of ICE 2W taken off the roadAnnual emissions reductions due to e-bike shift(Mt/year)Non-OECD Europe/Asia102525.925.1105India14 025.11584United States7U7.80.154Other Americas117.12.144Europe(OECD)909.83.243China166011.65.240Africa/Middle East33.93.231Brazil11%2.71.311E-bike refers to low-speed electric bicycles(not e-mopeds or e-motorcycles)as defined in Section II.34 City and County of Denver et al.(2023).Denvers 2022 E-bike Incentive Program Results and Recommendations.35 Mike Salisbury(Office of Climate Action,Sustainability,and Resiliency,City of Denver).(May 4,2023).Video interview by author.36 Lewis Fulton&D.Taylor Reich.(December 2021).The Compact City Scenario Electrified.18Worldwide,approximately 1.25 billion e-bikes are needed to support a shift that would yield about 400 megatonnes(Mt)of annual emissions reductions.This means that more than 1 bil-lion additional e-bikes are needed worldwide by 2050.After the non-OECD Europe and Asia region,the individual countries with the largest emissions reductions potential are India and the United States,where a high shift to e-bikes could take more than 40 million private vehi-cles(cars and ICE two-wheelers)and 8 million cars,respectively,off the road.Access ImpactsExpanding Access to Affordable,Clean TransportationThe integration of e-bikes with public transport can further reduce emissions,especially for first-and last-mile trips.37 E-bikes can significantly expand public transport station catchment areas beyond walking and conventional bicycles,enabling more people to consider using public transport.38 E-bikes are more likely to become a viable transport option for both personal and commercial vehicle trips when they are integrated with existing sustainable transport modes like rail and buses,and especially when coupled with complementary policies.Such policies in-clude enabling safer,more secure cycle trips by providing protected cycle lanes and convenient bicycle parking,or policies like low-emission zones and pricing parking,which disincentivize driving.Notably,e-bike battery fire concerns have led some transport agencies such as PATH,which operates commuter trains between New York City and New Jersey to consider banning e-bikes onboard metro trains,indicating a need to balance integration and safety goals.39 40Providing Alternatives for Underserved GroupsE-bikes can also improve mobility for underserved populations by connecting to transit or ful-filling entire trips.Women,older adults,people with disabilities,students,and even informal street vendors report being more willing to use an e-bike compared to a conventional bicycle.41 In the Copacabana neighborhood of Rio de Janeiro,Brazil,women make up 33%of e-bike users compared to 25%of traditional bicycle users.42 E-bikes make carrying goods and extra passen-gers tasks often required by women more manageable than when using conventional bicy-cles,and e-bikes offer more route flexibility compared to public transport.In the Netherlands,production of adapted e-bikes is growing,offering active mobility options for people with physical disabilities.4337 Michael Jenkins et al.(November 2022).What Do We Know about Pedal Assist E-Bikes?A Scoping Review to Inform Future Directions.38 TUMI.(2023).Increasing catchment area for public transport through e-bikes39 Henry Beers Shenk.(June 23,2021).The PATH Train Just Quietly Banned E-Bikes at All Times.40 Jules Flynn(Zoomo).(May 16,2023).Video interview by author.41 Samantha J.Leger,Jennifer L.Dean,Sara Edge,&Jeffrey M.Casello.(May 2019).“If I had a regular bicycle,I wouldnt be out riding anymore”:Perspectives on the potential of e-bikes to support active living and independent mobility among older adults in Waterloo,Canada;ITDP Indonesia.(May 17,2023).Video interview by author.42 Transporte Ativo.(August 2014).Contagem de Ciclistas.43 See:Van Raam.In New York City our low-income members use bikeshare very frequently.And they disproportionately choose electric bikes.”Caroline Sampanaro,LyftSOURCE:Antonio Reynoso,Flickr19“In Jakarta,womensurveyed said theyprefer to use e-bikesbecause it was moreadvantageous.Theythink its easier touse them in this kindof humid climate,and they are usuallycarrying goods.”Deliani Poetriayu Siregar,ITDP IndonesiaSOURCE:Toto Santiko Budi via ShutterstockIn some cities,e-bikes have been integrated into bikeshare programs,providing access without the upfront cost to users.For example,Tembici,a Brazilian bikeshare operator,offers shared e-bikes in eight of the 10 Brazilian cities it operates in,as well as in Bogot,Colombia.44 Shared e-bikes are growing in popularity:Data from eight bikeshare systems in the US operated by Lyft in 2022 shows a 107%increase in new e-bike riders since e-bikes were added to their systems in 2020.Data from the North American Bikeshare Association(NABSA)shows a similar trend,with the percentage of bikeshare systems offering e-bikes growing from just under 30%in 2019 to 50%in 2021,and shared e-bike trips tripling from about 6 million to 18 million over the same period.45 Income-qualified riders who use Lyfts reduced-fare membership take twice as many e-bike rides compared to standard members.46Though e-bikes are increasingly popular among users,bikeshare operators face challenges,as they cost more and have the higher operational costs of battery swapping and charging.This has limited the availability of e-bikeshare,especially in low-and middle-income countries(see Highlight Box 4).44 Tembici.(2020).Tembici Tem coisa boa.45 North American Bikeshare and Scootershare Association.(August 2022).3rd Annual Shared Micromobility State of the Industry Report 2021.46 Lyft.(2023).Lyft Multimodal Report 2023.20Tembici electric bikes are part of the companys bikeshare fleet in Sao Paulo.SOURCE:Toto Santiko Budi via ShutterstockBOX 4:DESPITE DEMAND,OPERATIONS COSTS HOLD BACK SHARED E-BIKESSince 2018,both public and privately operated bikeshare systems have been inte-grating e-bikes into their fleets.Most bikeshare systems that include e-bikes see high utilization of e-bikes compared to conventional bicycles;for example,in New York City,electric Citibikes are used for two out of five(40%)trips,despite making up only 20%of the fleet.47 Shared e-bike riders in New York have also reported con-necting with public transport more than twice as often as conventional bikeshare riders.48 Globally,as of 2022,29%of all bikeshare systems worldwide(567 total)offer e-bikes,up from 18%of systems in 2021.49 While shared e-bikes can greatly improve urban access,especially for low-income residents,the cost of purchasing shared e-bikes compared to traditional bicy-cles as well as the cost and logistics of ensuring shared e-bikes remain charged complicate bikeshare operations.50 Existing bikeshare stations may need to be retrofitted to connect to the electricity grid and enable e-bikes to charge when docked at a station.The cost of this varies widely by region because of labor and construction costs as well as permitting.Bikeshare operator Lyft estimates that if 20%to 30%of a systems stations are connected to the grid,that can offset up to 90%of vehicle miles traveled to conduct battery swaps.51 Indeed,battery swap-ping,where the bikeshare operator replaces low e-bike batteries with charged ones throughout the day,presents a different set of costs and limitations.Cities interested in integrating e-bikes into existing or planned bikeshare systems must understand these potential challenges and work with utility providers and other relevant stakeholders to identify feasible solutions.In low-and middle-income cities,financing might be available to support such solutions.For example,Brazils National Bank for Economic and Social Develop-ment(BNDES)financed Brazilian bikeshare company Tembici so it could expand its fleet of electric bicycles and increase its capacity to manufacture bikeshare bicycles domestically in Manaus,a hub for bicycle manufacturing in Brazil.The in-vestment is meant to address the negative impacts of climate change and reduce harmful emissions by encouraging people to switch from driving to using clean mobility options like e-bikes.5247 Lyft.(2023).Lyft Multimodal Report 2023.48 Lyft.(May 18,2023).Video interview by author.49 The Meddin Bike-Sharing World Map.(December 2022).The Meddin Bike-Sharing World Map Report.50 Justine Lee(25Madison).(April 27,2023).Video interview by author;Caroline Samponaro and Tejus Shankar(Lyft).(May 18,2023).Video interview by author.51 Lyft.(May 18,2023).Video interview by author.The right percentage of grid-connected bikeshare stations will vary based on system design,as well as constraints as a result of permitting and site selection.52 Brazilian Development Bank.(February 2023).BNDES Finances Tembici in an Unprecedented Micromobility Operation.21Economic ImpactsE-bikes can improve access to destinations(education,jobs,etc.),generating economic returns,though these can be difficult to quantify.E-bikes have also contributed to economic growth by supporting local delivery companies and expanding domestic manufacturing opportunities.Providing Economic Opportunity for Delivery WorkersGiven their relatively low cost and ability to cover longer distances,e-bikes can help people(especially those without access to a car)access economic opportunities.With the rise of app-based and traditional delivery companies,demand for delivery drivers is high.For example,in China in 2022,more than 7 million e-bike delivery drivers53 earned income from Meituan and Ele.me,the two largest food delivery apps in the country.54 55 Experts estimate that the total number of app-based delivery workers in China may be around 10 million.56 Many of these are low-income workers:According to Meituan,approximately four out of five of the apps delivery workers in 2022 were low-income“rural transfer laborers”and 6%report being impoverished.A large percentage of New York Citys reported 65,000 delivery workers57 use e-bikes(many also use motorized scooters;however,data on specific modes used by these workers is unavailable)largely because it is easier to maneuver and park an e-bike around the city than an automobile.Many of these delivery workers are low-income immigrants to the US,a group that faces high rates of unemployment.These economic opportunities are only accessible if potential drivers can afford a vehicle to use for deliveries.Though they are less expensive than cars,e-bikes can still be unaffordable,especially for people with limited income.In Brazil,bikeshare operator Tembici launched a partnership with a food delivery app to offer reduced-rate bikeshare plans for delivery work-ers.58 This includes special rates for e-bikes in seven major Brazilian cities.These plans put e-bikes within reach of low-income delivery workers,improving daily incomes with the greater speed and range that e-bikes provide.Unlocking Domestic ManufacturingBeyond their potential for emissions reductions and access to clean transport in cities,e-bikes can present positive impacts for the economy.China and countries in the EU have been leveraging the economic opportunity presented by e-bikes for some time in the form of domestic production and sales.Consumers in EU countries are buying between 5 million and 6 million e-bikes per year,which is about a quarter of the total bicycle market(about 22 million bicycles sold per year).The e-bike market has yet to plateau in the EU,with about 30%growth each year.59 Alternatively,in Brazil,demand for e-bikes is largely concentrated in wealthier cities such as So Paulo and Rio de Janeiro,and e-bikes make up a relatively small share about 1.5%of the overall bicycle market.Experts forecast e-bikes to grow to around 5%of the Brazilian bicycle market in the next few years.6053 Many app-based delivery workers in China use vehicles that would not be considered e-bikes in this report(instead riding e-scooters or similar);however,some use true e-bikes(e.g.,pedal-assist or throttle e-bikes with a maximum speed of 25 kph).54 Meituan.(February 2023).美团发布2022年骑手权益保障社会责任报告：624万骑手通过美团获得收入 2022 Meituan Rider Rights Protection Social Responsibility Report.55 Ele.me.(October 2022).2022蓝骑士发展与保障报告：全职或兼职送外卖-云快卖，移动点单服务商 2022 Delivery Rider Develop-ment and Protection Report.56 Shanshan Li(ITDP China)&Qiuyang Lu(ITDP China).(May 4,2023).Video interview by author.57 Nathaniel Meyersohn.(May 2023).How On-Demand Delivery Services Hobbled an American City.58 Tembici.(January 17,2024).Planos Ifood Pedal.59 Ceri Woolsgrove(ECF)&Philip Amaral(ECF).(May 23,2023).Video interview by author.60 Daniel Guth(Aliana Bike).(June 1,2023).Video interview by author.E-cargo cycles serve as a lower cost option for delivery drivers that may otherwise be unable to enter the market.SOURCE:Angus Gratton via Flickr22Demand and potential for domestic design and manufacturing is also growing in African coun-tries,where dozens of local private start-up companies are offering e-bike fleets for local deliv-eries,personal transport,and ambulance services.61Given that the global e-bike market is projected to grow by about 220%from 2022 to 2030,62 e-bikes are a viable product for the growth of domestic green manufacturing.Countries seek-ing to lead the way to greener industry have an opportunity in the coming years to bolsterdomestic production of e-bikes,contributing to their own national supply and,potentially,offering e-bikes as exports to other countries as demand grows.Additionally,as production ofelectric cars ramps up in many places,demand for lithium-ion batteries will grow.Industrialpolicies that prioritize e-bike production will be a more equitable,sustainable use of limitedbatteries and materials for example,because an e-bike battery capacity is 0.5kWh and anelectric cars is 80kWh,many more(e.g.,160)e-bikes can be produced for every electric car.6361 Emilie Martin et al.(2023).African Electric Bicycles Start-Up Booklet.62 Fortune Business Insights.(May 2023).Electric Bike Market Growth&Trends|Industry Analysis 2030.63 Authors calculations.SOURCE:International Labor Organization via Flickr23IV.SEVEN KEY BARRIERSTO E-BIKE UPTAKEIn nascent and developing e-bike markets and even in established ones,many barriers to ac-cess and use exist.These barriers limit e-bike uptake and thereby limit potential climate,ac-cess,and economic benefits from these vehicles.It is important to understand these barriers so that infrastructure and policy interventions promoting e-bikes can be most effective.1.Streets and policies prioritize vehiclesMany barriers to e-bike use are the same as those limiting the use of bicycles for everyday trips,and interventions that enable more and safer cycling also enable e-bike adoption.In many cities,even those where the majority of people do not own or have access to a car,streets are designed primarily for car users.Critical infrastructure that makes cycling safe,convenient,and comfortable includes:a network of interconnected cycle lanes(both for local and longer-distance trips between cities),low-speed streets with low volumes of vehicle traffic for travel within neighborhoods,and secure bicycle parking near all destinations.Without this infrastructure,women,young children,and older adults groups who consistently report not feeling safe or comfortable riding a bicycle without separation from vehicles are not likely to consider using an e-bike even if other major barriers like affordability,storage,and charging concerns are minimized.64 Without safe spaces on the street to ride an e-bike,and in the face of policies that heavily in-centivize and prioritize driving,e-bike uptake will be marginal at best.Policies that promote vehicle use include fuel subsidies,discounted or free parking provided by employers,and free municipal on-street parking.Even free on-street parking/charging and rebates for electric au-tos make e-bikes less attractive compared to private cars.This is especially true when there are no similar subsidies to offset the cost of purchasing an e-bike or provide cash-outs for cy-cling to work.64 Jennifer Dill,Tara Goddard,Christopher Monsere,&Nathan MacNeil.(January 2015).Can Protected Bike Lanes Help Close the Gender Gap in Cycling?Lessons from Five Cities“Without safe infrastructure,few people will actually consider shifting from cars to e-bikes.”Jules Flynn,ZoomoSOURCE:LarsPlougmann via Flickr242.Limited supply,high cost,and legacy market for competing modesIn nascent e-bike markets especially,supply of e-bikes and replacement parts is limited be-cause of a combination of low(or no)domestic manufacturing,high import tariffs,and few secondhand bicycles or parts.There also may not be accessible,low-risk alternatives to pur-chasing an e-bike such as community e-bike libraries or e-bikes integrated into bikeshare systems which allow people to try an e-bike before committing to purchasing one.Limited supply makes e-bikes and their parts expensive for people to purchase,especially compared to the mature markets for competing modes like ICE two-wheelers and used cars.In secondary cities in Ethiopia,potential for bicycle ridership is higher than in major cities be-cause trip distances are shorter and there is less traffic;however,tuk-tuks dominate short-dis-tance trips because most people do not have the disposable income to pay upfront for a bicy-cle(or e-bike).65 Similarly,e-bikes are more expensive than ICE two-wheelers in many African cities,where people have less disposable income compared to other regions,and e-bikes are too expensive to consider for personal use.66 Further,insufficient electrical grid capacity and inconsistent electricity access in general,especially for low-income populations,currently make it difficult to substitute e-bikes for ICE two-wheelers,which can be more reliably fueled with gas or diesel.67In Indonesia,e-bikes are also more expensive to purchase than ICE two-wheelers because the two-wheeler market is very well-established and benefits from subsidies and econo-mies of scale.68 Commercial use of e-bikes is also limited by a lack of supply.For example,in a pilot aiming to use bicycles for goods delivery in Mexican cities,none of the participating cooperatives used ecargo cycles because they were not able to afford them.Some organizations attempted to adapt e-bikes to transport cargo,but the added weight and limited carrying capacity made this unsuccessful.69 Substituting e-bikes for higher-polluting,higher-speed ICE two-wheelers(to reduce pollution and emissions)is challenging when e-bikes that are built to carry extra weight(i.e.,ecargo cycles)are not readily available.65 Seble Samuel.(June 15,2023).Video interview by author.66 Michael Linke.(May 2,2023).Video interview by author;Benjamin Hategekimana(ITDP Africa).(June 1,2023).Video interview by author.67 Seble Samuel.(June 15,2023).Video interview by author.68 ITDP Indonesia.(May 17,2023).Video interview by author.69 Eloy Gonzalez(ITDP Mexico).2023.Email communication with author.Well-established legacy markets for ICE two-wheelers and the lower upfront cost of tuk tuks inhibit the uptake of e-bikes,particularly in nascent markets.SOURCE:Katell Ar Gow via Flickr253.Unclear classification for e-bikesAs noted in Section II,classifications of e-bikes vary widely from country to country(and,often,subnationally).For example,in the EU,e-bikes must be pedal-assist,while in the US,e-bikes can have pedal-assist or a throttle.In the EU,China,and India,e-bikes are classified as bicy-cles and do not require riders to be licensed,carry insurance,or pay for registration,whereas in Vietnam and Singapore,registration for e-bikes is required,adding an extra barrier to their use.70 In other places,such as Indonesia,e-bikes exist in a poorly classified gray area between bicycles and motor vehicles.Unclear classification causes confusion for potential riders,who may not feel confident pur-chasing an e-bike if they are unsure of the rules for where e-bikes can be ridden and what doc-umentation is required.71 Fear of policy changes that may cause e-bikes or their parts to fluc-tuate in cost also reduces consumer confidence.72 It also creates challenges for retailers,who may choose not to stock e-bikes because of low consumer demand.Furthermore,unclear visual distinctions between vehicle classifications make it difficult to enforce regulations on where e-bikes versus heavier,faster two-wheelers are permitted to be ridden.4.E-bikes are perceived,taxed,and regulatedas luxury goodsSimilar to bicycles,e-bikes are often seen as something used for recreation rather than for everyday transport in cities.The perception of e-bikes as recreational not only impacts how individual people make choices about how to move around their cities but it underscores how e-bikes are taxed and regulated.E-bikes are often taxed as luxury items.This is especially truein Brazil,where 85%of the cost of an e-bike is taxes;the IPI tax(a national tax on manufac-tured products)makes up 35%of the taxes on e-bikes,which is a higher share than on cars,guns,and certain alcohols.73 Regulators also look at e-bikes as a recreational vehicle,not amode of transport,which leads to unclear and uninformed classification.7470 ITDP Indonesia.(September 2023).Road Map and Timetable of Two-Wheeler Electrification in Greater Jakarta:Electric 2W Inte-gration to Urban Traffic Guideline.71 Noa Banayan(PeopleForBikes).(May 4,2023).Video interview by author.72 Adam Mayer.(2019).Motivations and barriers to electric bike use in the U.S.:Views from online forum participants.73 Daniel Guth(Aliana Bike).(June 1,2023).Video interview by author.74 Jules Flynn(Zoomo).(May 16,2023).Video interview by author.Unclear distinctions between e-bikes and two-wheelers causes confusion for those trying to enforce regulations and those considering purchasing an e-bike.SOURCE:V.T.Polywoda via FlickrRegulators often see e-bikes as recreational vehicles,not transport modes,resulting in extraneous taxes that inflate e-bike purchase costs.SOURCE:Canyon Bicycles265.Few secure storage and theft-prevention optionsEven in established e-bike markets,secure storage and theft prevention are important factors that influence whether or not to purchase an e-bike for daily use.Because of their size and weight,it can be more difficult to lock e-bikes at traditional bicycle parking racks,and users may be unsure if they can safely lock an e-bike at every destination.E-bikes are also generally known to be more expensive than conventional bicycles,making them targets for theft.Recom-mendations to use more than one lock or a lock and chain also pose additional upfront costs its expensive to purchase high-quality locks.Furthermore,e-bike battery theft can be difficult to mitigate depending on the design of the e-bike.It is preferable to store an e-bike in a covered,dry location because battery degradation can occur more quickly with exposure to moisture.In dense cities,many people do not have the space or physical ability(i.e.,to carry an e-bike up several flights of stairs)to store an e-bike inside their building or apartment,and few,if any,alternative secure storage options are avail-able.In some cities,such as in China,it is illegal to store e-bikes indoors due to concerns sur-rounding battery fires(see Barrier 7 for more).6.Perceived lack of safetyMany people have never ridden an e-bike and likely will not feel comfortable purchasing one without having that experience.People often perceive riding an e-bike as less safe than riding a conventional bicycle because of its weight,ability to accelerate quickly,and motor.However,data shows that the risk of a crash involving e-bikes is only slightly higher than for convention-al bicycles,and this is mainly attributed to balance problems.75 E-bikes have not been found to be more likely to cause a serious crash than conventional bicycles.76 77 7875 A.Fyhri,O.Johansson,&T.Bjornskau.(November 2019).Gender differences in accident risk with e-bikes.76 Ibid.77 Institute for Road Safety Research.(May 2022).Pedelecs and speed pedelecs:Is a pedelec or speed pedelec more dangerous than a conventional bicycle?78 German Insurance Association.(November 2014).Compact accident research:Traffic safety of electric bicycles SOURCE:Katell Ar Gow via FlickrUse of e-bikes on shared paths causes concern for potential conflicts with pedestrians.Infrastructure that separates cyclists from pedestrians,such as protected bicycle lanes,deters unsafe incidents.SOURCE:V.T.Polywoda via Flickr“If you dont have a good place to store an e-bike,that becomes an issue.Youve got more to lose.Park-ing is an issue.”Philip Amaral,ECF27Other related safety concerns exist around e-bikes and potential conflicts with lower-speed conventional bicycles in bicycle lanes and pedestrians in shared paths or sidewalks.A Dutch study that compared adult and elderly cyclists each riding e-bikes and conventional bicycles along the same route found that the speed of elderly cyclists riding an e-bike was about the same as adult cyclists riding a conventional bicycle.79 Both groups slowed their speeds when riding an e-bike in“complex traffic situations,”indicating that e-bike riders self-regulate their speed based on their surroundings.Observations of e-bike riders,conventional bicycle riders,and pedestrians in Shenzhen showed that conflicts between e-bike riders and pedestrians were most frequent,exposing pedestrians to higher injury risks.80 Cities that lack sufficient infrastructure separating e-bike(and conventional bicycle)riders from pedestrians are more likely to experience these conflicts.Nonetheless,the vast majority of pedestrian injuries and fatalities come about in crashes with heavier,higher-speed motor vehicles.817.Charging and battery handlingCharging an e-bike battery is much simpler than charging larger electric vehicles like cars and buses;most e-bike batteries can be removed from the bicycle frame and charged using a standard wall outlet.As the market continues to mature,the range for e-bike batteries is ex-panding,making charging and what is often referred to as“range anxiety”82 less of an issue.83 However,in places where residential access to electricity is intermittent,needing to charge an e-bike at home presents a serious barrier to use.84Improper charging of lithium-ion e-bike batteries has also led to serious fires,especially when batteries are left to charge over long periods of time or when low-quality or incorrect voltage chargers are used.Repairs using low-quality or incorrect components can also increase risk of fires.In New York City during the first six months of 2023,13 people died as a result of more than 100 fires caused by e-bikes(likely by faulty lithium-ion batteries overheating).85 Without national battery or charging standards in the US,state and city-level legislators are pursuing safety standards for batteries and charging in New York.86 In Chinese cities,where one in five people owns an e-bike,concerns about battery fires means that people are not permitted to charge their e-bike batteries inside their homes.Large cities like Beijing provide public charging cupboards,similar to public cell phone charging stations,where people can pay a fee to leave their e-bike battery to charge.79 Willem P.Vlakveld,Divera Twisk,Michael Christoph,Marjolein Boele,Rommert Sikkema,Roos Remy,&Arend L.Schwab.(January 2015).Speed choice and mental workload of elderly cyclists on e-bikes in simple and complex traffic situations:A field experiment.80 Xinyu Liang,Xianghai Meng,&Lai Zheng.(August 2021).Investigating conflict behaviours and characteristics in shared space for pedestrians,conventional bicycles and e-bikes.81 World Health Organization.(June 2018).Global status report on road safety 2018.82 Range anxiety refers to the concern that an electric vehicle will run out of power before the user is able to reach a charging station.83 Ceri Woolsgrove(ECF)&Philip Amaral(ECF).(May 23,2023).Video interview by author.84 Seble Samuel.(June 15,2023).Video interview by author.85 Winnie Hu.(June 2023).How E-Bike Battery Fires Became a Deadly Crisis in New York City.86 Bicycle Retailer and Industry News.(November 28,2023).Bill would require all NY State shops selling e-bikes to have fire suppression equipment.Public charging stations for e-bikes serve as a solution to charging indoors,which can be a fire hazard.SOURCE:Herzi Pinki via Wikimedia Commons28V.RECOMMENDATIONSTO SUPPORT E-BIKE UPTAKEThe following recommendations are meant to address the barriers discussed in Section IV and to expand access,affordability,and ridership of e-bikes for both personal and commercial uses,as well as to cultivate a stronger cycling culture more broadly.Doing so will position cit-ies and countries to benefit from the climate,economic,and equity gains presented by a large-scale growth in e-bike use.Some recommendations should be implemented at the national level,some at the city level,and some at both national and subnational levels,as shown in Table 3.Table 3.Recommendations for Scaling E-bike UseE-bikes open up cycling to more people and trip types.SOURCE:ITDP IndonesiaLevel of governmentRecommendationNationalCityDevelop a definition for e-bikes and their use(or higher)Ensure quality manufacturing standards for e-bikes,batteries,and battery recycling(or higher)Improve affordability of e-bikesFund cycle infrastructure(or higher)Educate potential e-bike usersIncrease access to shared e-bikesDevelop an enforcement plan for e-bikes and cycle infrastructureImprove ability to import and/or produce quality e-bikes domesticallyDisincentivize private vehicle useAlign e-bikes with climate pledgesPursue universal charging for e-bikesIncorporate e-bikes into electrification plans29Recommendation 1|Develop a definition for e-bikes and their use Define weight,width,speed,and power maximums for e-bikes separate from ICEtwo-wheelers.Identify where e-bikes are permitted,such as on bicycle infrastructure,off-streettrails,and the street.With regard to traffic laws and regulations,national governments should clearly define e-bikes as bicycles for use on roads.Defining e-bikes as bicycles(for use on the road)facilitates their operation without obtaining a license,insurance,or registration.This is keyto enabling broad,easy use of e-bikes.A national standard helps consumers know what typeof e-bike is safe.Local road rules can then point to the national standard and permit the useof compliant e-bikes in bicycle lanes.A national standard also safeguards customers fromfalse or misleading information,such as companies branding electric mopeds as e-bikes.Aclear definition of e-bikes helps define what is not an e-bike.For example,electric mopeds ormotorcycles,which are heavier and can reach top speeds higher than 32 kph,should not bedefined as e-bikes and should not be permitted to use bicycle lanes.National governments should also use an industry standard for accepting e-bikes into consumer markets.For example,the European Union uses industrial standard EN15194,87 the worlds first comprehensive safety standard for electric-assisted bicycles,and requires all electric-assisted bicycles to comply in order to be sold in the EU.China uses the GB 4229588 standard.A national,regional,or federal definition helps to ensure consumer safety,standardizes production requirements,and enables enforcement for violations.Such standards should also require anti-tampering to reduce instances of after-market modifications of e-bikes to exceed speed restrictions.Another reason to develop a national definition is to facilitate national funding streams.A standardized national definition facilitates the deployment of national subsidies and grants to regional or municipal programs.For example,the Swedish ministry struggled to award funding from a 125 million fund for e-bikes and ecargo cycles because it lacked a clear national definition for what qualified as an e-bike.89 Recommendation 2|Ensure quality manufacturing standards for e-bikes,batteries,and battery recycling Introduce,disseminate,and enforce quality and safety standards for e-bikes and batteries.Develop a plan for e-bike battery(and other parts)recycling that mandates how materialsare recovered or disposed.Encourage manufacturers,retail shops,bikeshare operators,etc.to maximize inter-changeability and reuse of e-bike components and materials.The two main types of batteries used in e-bikes today are lead-acid and lithium-ion.Lead-acid batteries are not easily flammable and are much less expensive,but lithium-ion batteries are lighter,hold more energy,last longer,and charge faster.Lead-acid batteries are widely used in China because of their low cost.Unfortunately,their widespread use has also caused serious lead pollution in that country.9087 The European Committee for Standardization.(August 2023).Cycles Electrically power assisted cycles EPAC Bicycles.88 National Standards.(December 2022).电动自行车电气安全要求.89 Cycling Industries Europe.(2023).CIE Expert Group on Cargo Bikes and Cycle Logistics.90 Min Liu et al.(January 2023).Life Cycle Environmental and Economic Assessment of Electric Bicycles with Different Batteries in China.“It is really import-ant to have the Ministry of Trans-port launch the specification,de-fine what e-bikes are,and talk about safety,because we dont want mopeds in bike lanes.”Deliani Poetriayu Siregar,ITDP IndonesiaThe cycling industry has lacked standardization of components but the electric evolution of bicycles can change that.SOURCE:aerogondo2 via ShutterstockNationalNational30Lithium-ion batteries are widely used in e-bikes outside of China.As mentioned in the previous section(on barriers to e-bike uptake),low-quality lithium batteries are the cause of most e-bike fires,as they are highly sensitive to high temperatures and can burst into flames.Water seepage can also lead to fires.91 Low-quality batteries(not conforming to any existing standard)coupled with improper charging,storage,and maintenance of e-bikes increases this risk.National authorities can prevent these deadly fires by introducing,disseminating,and enforcing existing standards for e-bikes and batteries.Batteries for e-bikes are relatively tightly regulated in the EU,and there have been few safety issues in the region.In the EU,a Batteries Regulation ensures that batteries entering the EU market are sustainable and properly disposed of.92 An equivalent standard used in the US and elsewhere around the world is Underwriters Laboratories(UL)2849,93 the Standard for Electrical Systems for E-bikes.Further,UL 227194 is specifically for batteries used in light electric vehicles.Lawmakers in the US have introduced legislation to ensure higher levels of safety by taking faulty lithium-ion batteries off the market and setting consumer guidelines.This legislation is currently under consideration at the national level95 as well as in New York City.96Battery fires have also been a concern in China,where more than 6,000 e-bike related fires were reported in the first six months of 2021.97 Although China has a standard for e-bike batteries,it is not compulsory,with lax implementation by manufacturers and enforcement by authorities.98 A compulsory standard for lithium-ion e-bike batteries is in development;however,lead-acid batteries will not be covered.Further,technical training and certification for e-bike retailers and guidance for users on proper e-bike storage,maintenance,and battery charging is essential to prevent dangerous fires from occurring.National governments should also help ensure responsible battery recycling and disposal,especially as e-bike use expands and legacy models reach the end of their life span.The EU provides perhaps the most comprehensive example to date of battery recycling.The union has taken a unified approach to e-bike battery recycling,addressing this through the European Green Deal and as part of the circular economy.99 Beginning mid-2025,a more comprehensive regulatory framework on Extended Producer Responsibility will come into enforcement,with new rules for production,recycling,and repurposing of batteries.This will include higher collection and recycling targets being introduced over time:All collected batteries have to be recycled and high levels of recovery have to be achieved,in particular of valuable materials such as copper,cobalt,lithium,nickel,and lead.100Conversely,the US has not sought to address e-bike battery recycling in a coordinated way.In lieu of a national-level mandate,private-sector firms are leading the way in battery recycling.For example,Redwood Materials101 is working with Lyft the operator of several major bikeshare programs in North America,including New York Citys system(which has e-bikes)to recycle shared e-bike batteries.Another industry-led program enables private owners to easily recycle e-bike batteries.102 While these initiatives are a step in the right direction,without a national mandate,they are not compulsory,and there is little oversight of how materials are being recovered or disposed of.In addition to batteries,national governments should seek to improve recovery of other materials used in e-bikes.An emerging area for e-bike recycling is electric motors.This is particularly important,as e-bike motors are one of the components with a large environmental footprint because of the high use of copper in motor production.103 Overall,governments should nudge the e-bike ecosystem(manufacturers,retail shops,bikeshare operators,etc.)toward maximum interchangeability and reuse of e-bike components and materials.Including e-bikes in an overall effort to achieve a circular economy will increase the environmentalsustainability of this transport mode.Recommendation 3|Improve affordability of e-bikes Offer e-bike purchase incentives.Reduce import or other tariffs that inflate the cost of e-bikes.91 HDFCErgo.(June 2022).Why Do E-Bikes Catch Fire?Check Out 12 Tips to Prevent It.92 EUR-Lex.(July 2023).Regulation(EU)2023/1542 of the European Parliament and of the Council of 12 July 2023 concerning batte-ries and waste batteries,amending Directive 2008/98/EC and Regulation(EU)2019/1020 and repealing Directive 2006/66/EC.93 UL Solutions.(n.d.).E-Bikes Certification:Testing to UL 2849.94 UL Standard.(September 2018).UL 2271|UL Standards&Engagement|UL Standard.95 United States Congress.(March 2023).H.R.1797 Setting Consumer Standards for Lithium-ion Batteries Act.96 E-bike Lovers.(March 2023).New Law Requires Certification for Electric Bicycles and Batteries in NYC to Improve Safety Stan-dards.97 Shawn Lin.(October 2021).Chinas 300 Million E-Bikes Cause Alarming Number of Fires98 Shanshan Li&Qiuyang Lu.(May 4,2023).Video interview with ITDP China.99 European Commission.(December 2022).EU agrees new law on more sustainable and circular batteries.100 European Commission.(August 2023).Batteries.101 Redwood Materials.(n.d.).Redwood Materials.102 eBike Battery Recycling.(n.d.).Hungry for E-bike Batteries.103 Liu et al.(January 2023).Life Cycle Environmental and Economic Assessment of Electric Bicycles with Different Batteries in China.“Technical stan-dards and certifi-cation are import-ant to improve safety,particularly for commercial e-bike fleets.Say you have a fleet of 500 e-bikes,and one or two catch fire,you could be looking at a ca-tastrophe.”Michael LinkeNational City31While mid-range e-bikes cost 10 to 15 times less than a mid-range car,104 they are still more expensive than the majority of conventional bicycles and therefore remain unaffordable for many.In recent years,local and national governments(particularly in wealthier countries,such as the US,Australia,and EU members)have offered incentives such as point-of-sale vouchers,rebates,and credits for trading in a vehicle to reduce the cost of purchasing an e-bike or ecargo cycle.105 106 Incentive programs in other cities and countries have alsobeen extended to businesses to purchase e-bikes for deliveries or other commercial uses.National-level examples of this include the Netherlands(up to 62%of purchase offsetthrough tax deductions),Germany(up to 4,200 purchase subsidy),and Belgium(up to4,000 purchase subsidy).107Of course,initiatives to improve the affordability of e-bikes should reflect each countrys economic reality.An example of such an initiative from a middle-income country comes from India.As part of the Delhi EV Policy adopted in 2021,offering a 25%discount to 10,000 e-bike customers and a 33%discount to 5,000 ecargo cycle customers is meant to generate both personal and commercial demand for e-bikes.108 The design of these incentive programs is important:Many offer vouchers or credits on a sliding scale based on income,with lower-income residents able to receive more support.Point-of-sale vouchers(like those used in Denver;see Highlight Box 3)are preferred over rebates,because people do not have to be able to pay the full amount up front and wait for reimbursement.Ensuring support and buy-in from bicycle retailers is also critical.Notably,Delhis incentive program includes a scrappage scheme where e-bike and ecargo cycle buyers can receive an extra Rs 3,000(USD$36)to scrap or deregister an ICE two-wheeler.109 Incentive programs could also be tied to quality standards,where only certified e-bikes and batteries qualify for the incentive.110Jurisdictions that offer tax advantages for the purchase of an electric car should work to ensure that these can also be applied to e-bikes.Compared to EVs,subsidies for e-bikes may do more to incentivize purchase because the cost offset by the subsidy is much higher.For example,a$1,000 subsidy offsets 66%of the cost of a$1,500 e-bike compared to 3%of a$30,000 EV.In this hypothetical scenario,the presence of the subsidy likely reduces the purchase price enough to change the demand for e-bikes,while those who could not afford a$30,000 electric car or truck will most likely not be able to afford one that is 3%cheaper.A survey of e-bike voucher users in Denver showed that 67%of low-income respondents would not have purchased an e-bike without the subsidy.111Securing and allocating funding for e-bike purchase incentives may be challenging for local and even national governments with limited budgets.However,many governments have been able to introduce and dedicate funding for incentives to offset the cost of purchasing an electric automobile(as well as for electric car charging on public rights of way)as a means of encouraging electric car or truck uptake.City and national governments should revisit these incentives and explore how allocating some of those funds or designing similar programs to support the purchase of e-bikes could be a more effective path to reducing harmful emissions and achieving related environmental and access goals.Revenues generated from policies intended to reduce demand for driving,such as priced on-street parking or congestion pricing,could also help fund e-bike purchase incentives(see Recommendation 9).Alternatively,market-based interventions,such as supporting the local production and distribution of e-bikes across a range of price points,could increase supply and lower overall purchase costs for consumers.112 While some governments may not be able to offer upfront purchase incentives for e-bikes,they may be able to reclassify e-bikes so they are no longer considered“luxury goods”or forgo import tariffs(see Recommendation 8).This is what Brazil has done with electric cars since 2015113,and Ethiopias national NMT strategy suggests this for bicycles.114 Countries could consider lowering taxes for,or otherwise incentivizing,the domestic production of e-bikes to boost local supply and drive down the cost to purchase.104 Dana Yanocha and Mackenzie Allan.(2019).The Electric Assist:Leveraging E-bikes and E-scooters for More Livable Cities.105 Noa Banayan,Ashley Seaward,&Kyler Blodgett.(2023).Electric Bicycle Incentive Toolkit.106 European Cyclists Federation.(n.d.).Money for bikes:Tax incentives and purchase premiums for cycling in Europe.107 Urban Arrow.(November 2022).Receive Subsidies When Purchasing Cargo Bikes for Businesses.108 Transport Department of NCT of Delhi.(2021).Delhi EV Policy.109 Express News Service.(April 2022).Delhi government includes e-cycle under its EV policy.110 Connecticut Department of Energy and Environmental Protection.(July 2023).Electric Bicycles eBikes.111 City and County of Denver et al.(2023).Denvers 2022 E-bike Incentive Program Results and Recommendations.112 Michael Linke.(May 2,2023).Video interview by author.113 Waldheim Garcia Montoya.(March 2023).EV import subsidies divide Brazils auto industry.114 ITDP.(May 2020).Ethiopia Non-Motorized Transport Strategy 20202029.“We know that if we only make progress on EVs electric cars and trucks or e-bikes,we wont get any-where near our climate goals.We know that we need to make action on both fronts.So we want to promote EVs,but we also know that we need to get people out of their cars,so just investing in EVs is not going to get us to our climate goals;we need to invest in e-bikes as well.”Mike Salisbury,City of Denver32Recommendation 4|Fund cycle infrastructure Develop,finance,and implement a network of bicycle lanes and supportive bicycleinfrastructure that accommodates e-bikes.Designate annual,national-level funding for active mobility.E-bikes thrive when cycling is an irresistible choice for travel.A connected network ofprotected cycle lanes,greenways,safe intersections,and low-speed streets is critical tosupport many types of people cycling for everyday trips.The same is necessary to support theuse of e-bikes.115 Cities in China and Western Europe,where e-bike use is highest,also havesome of the worlds most extensive cycle lane networks,coupled with low speed limits forvehicles and safe crossings at intersections.While providing cycle lanes and bicycle parkingis an important first step,these should be designed in a way that also accommodates e-bikes.For example,allowing for wider cycle lanes and including a passing lane in the design canmake maneuvering an e-bike easier and more comfortable.Bicycle parking racks should be farenough apart that an e-bike can fit between racks with other parked bicycles present.Parking racks should also be located far enough away from walls or other items so it is easy to maneuver a larger,heavier e-bike into the parking space.E-bike chargers could be installed in high-demand bicycle parking areas.National and local governments play key roles in creating environments that support people using bicycles and e-bikes,including through:Creating standards for infrastructure design(national governments).Providing funding for implementation of infrastructure and programming(nationaland local governments).Creating platforms for local governments to exchange information to facilitatepeer-to-peer learning about cycling(national governments and/or civil societyorganizations).Recently,Ireland and France have both made significant progress in supporting cycling(and e-bike use)at the national level.Irelands National Transport Authority allocated 290 million euros(USD$323 million)to deliver hundreds of projects to support cycling and walking in line with thegovernments Climate Action Plan.116 Similarly,in 2023,the French government committed 2 billioneuros(USD$2.2 billion)through 2027 to improve cycle infrastructure and help people buy bicyclesin an effort to reduce car use and boost cycling across the country.E-bikes are gaining popularityin France,with one in four bicycles purchased in 2022 being electric,117 and 65 million euros($72.3million)have been allocated to help people buy e-bikes as part of this program.National governments can also be particularly important players in stimulating e-bike use in suburban and rural areas where municipal authorities may not have jurisdiction or sufficient resources.Another key role that national governments can play is in stimulating countrywide,inter-city cycle networks.E-bikes are particularly well-suited for longer-distance trips,such as between cities.When cyclists can complete these trips on high-quality off-road paths specifically designed for cycles(or“bicycle highways”118),e-bikes become a very attractive substitute for vehicles for more types of trips.115 Shanshan Li(ITDP China)&Qiuyang Lu(ITDP China).(May 4,2023).Video interview by author.Noa Banayan(PeopleForBikes).(May 4,2023).Video interview by author;Justine Lee(25madison).(April 27,2023).Video interview by author.116 National Transport Authority.(n.d.).Active Travel Investment Programme.117 Sandy Dauphin.(May 2023).The Government Releases Two Billion Euros for Its New Bicycle Plan.118 ITDP.(February 2020).Will E-Bikes Make Cycle Highways Happen?SOURCE:ITDP MexicoNational City33Recommendation 5|Educate potential e-bike users Develop educational campaigns to encourage e-bike use across demographic groups.Shift perception of cycling(and e-bike use)from recreational to transportation.Because e-bikes are less familiar than traditional bicycles to most people,cities should work to educate the public about what an e-bike is(classification,speed,etc.)and how they differ from higher-speed vehicles like mopeds and motorcycles.Education on e-bike safety,regulations for use on the street,and related policies is also needed.This could include partnering with local cycling advocacy groups or bicycle retailers to disseminate information and communicate new programs,like the availability of e-bike purchase incentives or community e-bike libraries.Outreach events where people are able to test-ride e-bikes and receiveinformation on incentive programs or sign up for a bikeshare membership could help peoplefeel more comfortable integrating an e-bike into their daily life.Furthermore,promoting thesafe use of e-bikes and noting the dangers associated with improper charging or battery usecan help to curb accidents and injuries.Cities might also consider partnering with privatesector companies,such as those that employ delivery workers who use e-bikes,to ensure thatcommercial e-bikes and batteries meet safety standards.Recommendation 6|Increase access to shared e-bikes Offer e-bikes as part of public bikeshare programs.Consider incentives for local delivery companies that offer employees long-termaccess to shared e-bikes instead of vehicles.Even if people know how to ride a bicycle,they may never have tried riding an e-bike.Giving people a low-risk opportunity to experience riding an e-bike(i.e.,without the responsibility to purchase,store,or maintain one)can help people better visualize how an e-bike might fit into their life and work for the types of trips they make.Many cities have done this by integrating e-bikes into existing bikeshare programs.Similar to integrating e-bikes into bikeshare systems as a low-risk way for people to try them,long-term e-bike rentals are also gaining popularity,especially in the United States and Australia.Long-term e-bike rental programs are also increasingly used by local delivery workers who do not have access to a car or two-wheeler.Monthly subscription programs typically provide access to an e-bike whenever its needed,as well as maintenance and even spare batteries.While these programs are largely offered by private companies,cities might consider incentives for local delivery companies that offer their employees access to e-bike rentals,or subsidizing e-bike rental programs for public employees.Though much smaller than a citywide bikeshare system,e-bike libraries function similarly in terms of expanding access and awareness and reducing barriers.These programs are typically run by community-based organizations and enable residents to borrow an e-bike free of charge for weeks or months at a time.Users can charge and store their rented e-bikes at home,or they can drop them off at a designated location between uses.This model can be particularly ideal if a short-term grant or local funding is secured for a limited number of e-bikes.E-bike libraries can be a good option to provide access to e-bikes in places where a full bikeshare system may not be available.119119 Noa Banayan(PeopleForBikes).(May 4,2023).Video interview by author.SOURCE:Ana NassarCityNational City34Recommendation 7|Develop an enforcement plan for e-bikes and cycle infrastructure Designate responsibility for citing noncompliant vehicles that use cycle lanes.Ensure enforcement officers can visually distinguish between e-bikes and higher-speed mopeds and motorcycles.With speeds comparable to conventional bicycles,low-speed e-bikes should be permitted to ride in bicycle lanes and other bicycle infrastructure citywide.For speed pedelecs and other e-bikes that can reach speeds of 45 kph,we recommend differentiating between the ability touse bicycle infrastructure in high-and low-density urban areas.In high-density urban areas,where vehicle speeds tend to be lower and there are many people cycling and walking,speedpedelecs should not use cycle or pedestrian infrastructure unless that infrastructure has beendesigned to accommodate them,such as the inclusion of passing lanes.However,in lower-density areas farther from the city center,where vehicle speeds may be higher and cyclinginfrastructure is likely to be less crowded,speed pedelecs could be permitted to use cyclelanes where available.Higher-speed(ICE or electric)mopeds and motorcycles should not be permitted to use cycle lanes,and there should be clear and enforced penalties for doing so.Cities will need to designate responsibility for citing mopeds and motorcycles that use or block cycle lanes this could fall under the purview of municipal police and therefore will require coordination between police and the transport agency.It is important to establish clear,visual distinctions between e-bikes and faster mopeds to ensure enforcement officers can more easily identify violating vehicles.In other words,high-speed devices should look out of place in low-speed infrastructure.Strict penalties should be set and enforced for modifying e-bikes to travel at higher speeds,as well as for counterfeiting manufacturer labels that differentiate between devices.Recommendation 8|Improve ability to import and/or produce quality e-bikes domesticallyRemove(or reduce)import tariffs on foreign-produced e-bikes.Offer incentives to attract e-bike manufacturers to produce domestically.One of the biggest barriers to e-bike uptake,especially in nascent markets,is a lack of supply of e-bikes and e-bike parts,which leads to high prices and a sense of scarcity.Governments need to ensure that safe,quality e-bikes(see Recommendation 2)can be imported or manufactured domestically and sold to consumers at affordable prices.It is also important to have measures in place to avoid dumping of low-quality e-bikes from foreign markets.Foreign brands may be subject to import taxes and other restrictions that contribute to supply issues.Reducing import tariffs can be very helpful to stimulating emerging modes.This was the case in Brazil,where electric cars and parts have been exempt from the countrys 35%vehicle import tariff since 2015,helping make Brazil the biggest electric car and truck market in Latin America.120 A more welcoming tax structure for e-bike production would help stimulate job creation as well as e-bike supply.Ethiopias national NMT strategy identifies the existing 20%import tariff on bicycles and bicycle parts as an impediment to accessing high-quality bicycles,and it recommends removing the tariff as part of the implementation of the strategy.121 Currently,Ethiopias Ministry of Transport and Logistics and Ministry of Finance are coordinating on such an exemption on taxes for importing bicycles and e-bikes.National(and in some cases subnational)governments could also consider offering incentives to attract local manufacturing of e-bikes and e-bike parts,increasing overall domestic supply and ensuring a range of models are available at different price points.Introducing a simple,lower-cost,good-quality e-bike model to the market could be even more impactful at spurring uptake than a government-sponsored subsidy scheme that lowers the purchase cost of a higher-priced model for a small subset of potential users.122 Experts warn against encouraging very inexpensive,low-end e-bikes,though,as these have very limited ranges and low-quality batteries,which greatly increases the risk of fires(in the case of lithium-ion batteries)or serious environmental damage(in the case of lead-acid batteries).120 Waldheim Garcia Montoya.(March 2023).EV import subsidies divide Brazils auto industry.121 ITDP Africa.(May 2020).Ethiopia Nonmotorized Transport Strategy 20202029.122 Michael Linke.(May 2,2023).Video interview by author.NationalCity35Recommendation 9|Disincentivize private vehicle use National CityImplement parking pricing and/or zone-based vehicle restrictions such as congestionpricing or a low-emission zone,and direct revenue to e-bike programs.Making the implicit costs of driving explicit through policies like pricing parking,fees per vehicle kilometer traveled,congestion pricing,and emissions-based pricing can nudge people and companies to rethink using a private vehicle for every trip and shift some trips to cycling/e-bikes.123 The City of London(a one-square-mile commercial district within Greater London)announced in 2018 that it would restrict vehicle access on half its roads and limit vehiclespeeds to 15 mph to reduce emissions and improve comfort and safety for pedestrians andpeople riding bicycles.124 Five years later,pedestrians account for the majority of trips in thisarea,and cyclists make up 40%of road traffic during peak hours.125Low-emission zones designed to levy a fee on or restrict access for the highest-polluting freight vehicles could encourage delivery companies to switch to a model where last-mile deliveries are done using ecargo cycles.Focusing on commercial fleet transitions that integrate e-bikes as opposed to individual uptake is a helpful entry point for broader e-bike adoption,especially in cities where e-bikes are relatively expensive or difficult to find.126 A portion of revenues from low-emission zone or congestion-pricing entry fees could be allocated to e-bike purchase subsidy or e-bikeshare programs.Importantly,these policies need to be coupled with cycle infrastructure thatsupports direct,comfortable trips by bicycle or e-bike.123 ITDP.(March 2021).Taming Traffic.124 Eillie Anzilotti.(October 2018).The City of London is kicking cars off half its roads.125 Carlton Reid.(March 2023).“Cyclists Now Outnumber Motorists in City of London.126 Danielle Hoppe(ITDP Brazil).(June 1,2023).Video interview by author.SOURCE:waltarrrrr via FlickrSOURCE:ITDP ChinaNational City36into countries Nationally Determined Contributions(NDCs)to the Paris Agreement on Climate Change.This could make efforts to promote e-bike use in low-and middle-income countries eligible for carbon credits.NDCs detail what actions countries will undertake across all sectors to align with the Paris Agreement goal to limit global warming to 1.5C.A search of NDCs127 revealed that only three countries Nepal(Second NDC),Sierra Leone(Revised First NDC),and Tuvalu(Revised First NDC)mention e-bikes.128 Including e-bikes in NDCs would help align national institutions,create plans with measurable outcomes,improve Monitoring,Reporting,and Verification(MRV)of GHG emissions avoided through e-bike uptake,and improve funding prospects for programs to support e-bikes and cycle infrastructure.Furthermore,as carbon markets mature in coming years,additional funding for carbon-reducing projects will become available under Article 6 of the Paris Agreement.Article 6 establishes mechanisms for selling carbon credits,and plans to support e-bike use could be candidates for international funding under Article 6.To ensure that e-bike projects are eligible,countries should add e-bikes to their NDCs.Recommendation 11|Pursue universal charging for e-bikes Gather knowledge from manufacturers and other stakeholders around challenges andopportunities related to universal e-bike charging.SOURCE:John-Fs-Pic via ShutterstockNational127 Conducted using Climate Watchs NDC Search Tool.128.Nepals NDC mentions“e-vehi
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