VIEWPOINT

2023

ELECTRIFYING
THE FUTURE

How EV conversion can

drive decarbonization

AUTHORS

As the world’s desire to achieve decarbonization Akshay Prasad

intensifies, an innovative solution is emerging.
Hirotaka Uchida
Electric vehicle (EV) conversion (converting existing
internal combustion engine [ICE] vehicles into EVs) Stephen George
offers a practical, cost-effective way to electrify
the transport sector, enabling emerging economies
to accelerate their sustainability journey. This
Viewpoint looks at how EV conversion can drive
decarbonization, especially in emerging markets
such as Southeast Asia (SEA).
 VIEWPOINT ARTHUR D. LITTLE

DECARBONIZ ATION & EV CONVERSION AND

THE TR ANSP OR T SEC TOR RETROFIT KITS OFFER
Carbon-neutral fuels and EVs are both viable ways
A W AY T O C O N V E R T
to combat pollution from the transport sector. TRADITIONAL ICE
However, carbon-neutral fuels are expensive, POWERTR AINS INTO
require a lot of energy to produce, and have near- ELECTRIC ONES
term scalability issues, while EV adoption does
not solve the problem of pollution from existing
ICE vehicles. The focus of this Viewpoint, EV
Global & regional transport emission goals
conversion, offers a more practical solution for
decarbonizing the transport sector, particularly Climate change, enhancing air quality, and reducing
in emerging markets like SEA. fossil fuel dependency are being addressed at
a global level through initiatives like the Paris
EV conversion and retrofit kits1 offer a way to
Agreement and the Conference of the Parties (COP)
convert traditional ICE powertrains into electric
summits. Based on current climate projections,
ones, significantly reducing carbon emissions
achieving global net-zero emissions by 2050 and
from ICE vehicles. EV conversion kits can:
limiting global warming to 1.5 degrees Celsius above
- Accelerate EV adoption by making them
preindustrial levels are critical.
more accessible and affordable.
Based on data from the International Energy
- Create a circular economy by extending
Agency (IEA), the transport sector is responsible for
the lifecycle of ICE vehicles.
nearly 37% of global CO2 emissions (from end-use

- Tackle the root cause of emissions by sectors in 2021), so addressing vehicle emissions
targeting the existing base of ICE vehicles. must be a top priority. More specifically, the sector
is responsible for 15%-35% of total CO2 emissions in
1 For the purpose of this Viewpoint, EV conversion kits refer to retrofit the US, India, and China, according to ADL analysis.
kits as well.

Figure 1. Passenger cars contributeAsthe highest amount of

shown in Figure 1, passenger and commercial
vehicles are the largest emissions sources,
GHG emissions underscoring the importance of electrifying them.

Countries around the world have announced

targets centered around reducing emissions
from the transport sector. For example, the EU
Figure 1. Passenger cars contribute the highest amount
aims to reduce transport emissions by at least
of GHG emissions
90% by 2050 compared to 1990 levels. China
3% wants EVs to represent 50% of new car sales by
3%
5%
2035. The US aims to have zero-emission vehicles
7% constitute 50% of all new passenger vehicles sold
Passenger cars
MDT & HDT 39% by 2030 with a strong push for local production
Shipping 9% via policies like the Inflation Reduction Act.
Aviation
Buses & minibuses Norway and the Netherlands have declared plans
LCV
2W/3W to ban the sale of new ICE vehicles by 2025 and
Rail 11%
2030, respectively. Most major SEA countries have
announced ambitious electrification targets to

23% stay in line with global trends (see Figure 2).

Note: MDT = medium duty truck; HDT = heavy duty truck; LCV = light commercial vehicle
Source: Arthur D. Little, IEA

ELECTRIFYING THE FUTURE 2

 VIEWPOINT ARTHUR D. LITTLE

Figure 2. Decarbonization in SEA

Figure 2. Decarbonization in SEA

Indonesia Thailand Malaysia Philippines Vietnam Singapore

No CN target set No CN target set

CN target (net-zero target: 2050 2050 No CN target set 2050 (net-zero target:
2060) 2050)

Share of
transport sector 30.8% 24.7% 29.7% 27.8% 22% 15.2%
emissions, 2019

Transport sector
prioritization
   N/A N/A N/A
in achieving
net-zero target

Passenger cars
in operation 22,457K 18,374K 15,813K 536K 2786K 645K
(stock, 2021)

• BEV & PHEV to • No concrete EV

• 30% of total vehicle • 10% of road
contribute to 20% target
• 20% of total vehicle production in 2030 transport • 100% of road
and 50% of total • By 2050, all
EV policy target production in 2025 to be zero-emission
vehicle sales in
(motorcycle, cars,
transport to run
transport to be
to be xEV vehicles (i.e., BEV & and PUVs) to be BEV by 2040
2025 and 2035, on electricity or
FCEV) BEV & PHEV by 2040
respectively green hydrogen

High Moderate Moderate

High Low to moderate Low
EV market (automotive market is (automotive market (automotive market is
(automotive (huge influx of (automotive market
attractiveness market is huge)
relatively huge & BEV & BEV target are relatively huge, but
Chinese EV players) is very small)
target is high) moderate) BEV target is low)

Note: CN = carbon neutral; EV includes hybrid (xEV), plug-in hybrid (PHEV), battery electric vehicle (BEV), fuel cell electric vehicle (FCEV), and public utility vehicle (PUV)
Source: Arthur D. Little
Note: CN = carbon neutral; EV includes hybrid (xEV), plug-in hybrid (PHEV), battery electric vehicle (BEV), fuel cell electric vehicle (FCEV), and
public utility vehicle (PUV)
Source: Arthur D. Little

B I O F U E L S H AV E generation biofuel) are CAPEX-intensive and

require capture facilities and transport pipelines.
RECEIVED CONSIDER ABLE
Their underground storage sites necessitate
AT T E N T I O N A S A
intricate engineering, geologic assessments,
POTENTIAL SOLUTION and compliance with safety and environmental
FOR DECARBONIZING regulations. Establishing biomass feedstock supply

THE TR ANSPORT SECTOR chains, conversion facilities, and refining facilities

are also CAPEX-intensive. This is why second- and
third-generation biofuels cost 1.7-2.3 times more
than fossil fuels, making them commercially
Carbon-neutral fuels
unviable.
Carbon-neutral fuels do not generate net CO2
Hydrogen fuel scalability is hindered by the
emissions when burned or used, and they use
energy-intensive and costly nature of electrolysis
sustainable production methods to reduce
(the primary method of production). Scalability is
or offset carbon emissions throughout their
further hindered by the low availability of renewable
lifecycle. Synthetic fuel, hydrogen, ammonia,
energy sources required for sustainable hydrogen
offset fuel, and biofuel are examples of carbon-
production. Similarly, biofuel production — which
neutral fuels (see Figure 3). Biofuels have received
involves complex, energy-intensive processes
considerable attention as a potential solution
like Fischer-Tropsch synthesis and pyrolysis —
for decarbonizing the transport sector, but there
requires substantial investments in equipment,
are several challenges to its widespread adoption
infrastructure, and feedstock.
(see Figure 4).
Given the challenges associated with carbon-
Technologies like bioenergy with carbon capture
neutral fuels, electrification of the transport
and storage (BECCS) (a third-generation biofuel)
sector has emerged as the preferred pathway
and cellulosic ethanol production (a second-
to decarbonization.

ELECTRIFYING THE FUTURE 3

 VIEWPOINT ARTHUR D. LITTLE

Figure 3. Carbon-neutral fuels

Figure 3. Carbon-neutral fuels

CN fuel

1
Playable Clean energy such as renewable energy & nuclear power
energy
Storage battery 1 is stored in batteries & used as fuel

2 Gray hydrogen (reformed), blue hydrogen (reformed + CCS)

Hydrogen 2 & green hydrogen (water electrolysis of renewable energy)
are classified & used as fuel

3 Classified into gray ammonia, blue ammonia & green

Brown coal Ammonia 3 ammonia according to hydrogen classification of raw
material & used as fuel

4 Synthesis gas is generated from hydrogen & CO2 &

synthesis fuel is refined by FT method & used as fuel;
CCS Synthetic fuel 4
environmental impact fluctuates due to origin of
hydrogen & CO2

5
Oil Offset fuel 5 Using CCS & credits to offset CO2 emissions from oil
& gas for use as fuel

6
Natural gas is liquefied into LNG & liquified petroleum gas
Natural gas Gas (LNG) 6 for use as fuel; burning natural gas for power generation

First generation (1G) 7 Biofuel

(grain) Ethanol & diesel are produced from biomass resources
(bioethanol & 7 such as grains & mixed with petroleum products for use
Second generation (2G) biodiesel)
(waste cooking oil &
vegetable oil) 8 Can be used without mixing with petroleum products by
Biofuel
Third generation (3G) (HVO/SAF)
8 producing biofuel from waste cooking oil, vegetable oil
(microalgae) & oil from microalgae through hydrogenation treatment

Note: CCS = carbon capture and storage; LNG = liquefied natural gas; HVO = hydrotreated vegetable oil; SAF = sustainable aviation fuel
Note:
Source: CCS
Arthur D.=Little
carbon capture and storage; LNG = liquefied natural gas; HVO = hydrotreated vegetable oil; SAF = sustainable aviation fuel
Source: Arthur D. Little

Figure 4. Challenges for biofuel adoption

Figure 4. Challenges for biofuel adoption

Feedstock tech. generation Description Characteristics

Oil crops (palm oil, rapeseed oil)

High-quality,
Transitioning from 1G to 2G

1G Sugar crops (sugar beet, sugar cane)

Increasing difficulty for processing

virgin feedstocks
Energy crops (grass, tree, sweet sorghum)

High-quality,
Agricultural & food waste (beet pulp, waste oil)
homogeneous
Off-gases & landfill gas (CO2, CO, biogas)
Agricultural arisings (straw, sugar beet tops) Low-quality,
2G
Forestry arisings (wood waste, forestry products) homogeneous

Municipal solid or industrial waste

Very low-quality,
Liquid waste & effluents (sewage) heterogenous

Lack of commercialized
3G/4G Algae grown for fuel use High-quality,
scale development
for 3G (4G through metabolic engineering) virgin feedstocks

Source: Arthur D. Little

ELECTRIFYING THE FUTURE

Source: Arthur D. Little
4
 VIEWPOINT ARTHUR D. LITTLE

EV adoption worldwide in 2022 (according to Hedges &

Company), the urgent need for an innovative
EV penetration across all transport modes
solution to effectively reduce greenhouse gas
(excluding two-wheelers [2Ws]/three-wheelers
(GHG) emissions from existing vehicle stock
[3Ws]) is projected to reach only 145 million
becomes clear.
vehicles, accounting for 7% of the road vehicle
fleet by 2030, according to forecasts by IEA.
There are three main reasons. First, higher up-
BENEFIT S OF
front costs compared to ICE vehicles discourage E V CONVERSION
adoption, despite EVs having lower total cost of
EV conversion has the potential to swiftly
ownership. Second, the underdeveloped charging
decarbonize the transport sector by transforming
infrastructure, with a scarcity of charging
conventional ICE powertrains into electric ones.
points and slow charging speeds, creates range
In this section, we explore the advantages and
anxiety and inconvenience for EV owners. This is
opportunities offered by EV conversion.
a classic “chicken and egg” dilemma: charging
infrastructure providers are hesitant to invest
EV conversion is the most cost-effective
in the market until EVs reach critical mass,
path to electrification
and consumers are reluctant to embrace EVs
without a well-established, widespread charging EV conversion significantly reduces the up-
infrastructure. Third, limited availability of front costs associated with purchasing a new
EV models compared to ICE vehicles restricts EV (see Figure 5). Mid-range EVs cost between
consumer choice and affordability. Globally, the US $40,000-$50,000. An EV conversion kit for a
ratio of ICE:EV models is 13:1. Even in China, which vehicle with a range of 250 kilometers (km) and
has made huge strides in EV adoption, the ratio power capacity of 25-30 kilowatt hours costs
stands at 2.2:1, and emerging economies like around $11,000, a savings of 66%. In places like
Thailand have a ratio of 9.7:1. SEA, where cost considerations play a crucial
role in consumer decision-making, EV conversion
Wood Mackenzie forecasts global EV stock to
offers a much more affordable pathway to
reach 323 million by 2040. When compared to the
electric transport.
approximately 1.4 billion ICE vehicles operating
Figure 5. Economical benefits of EV conversion

Figure 5. Economical benefits of EV conversion

Option 1: Option 2:
New EV purchase vs. ICE resale Retrofit existing ICE with EV conversion kit

Assumes existing vehicle owner of 5-year-old ICE Assumes existing vehicle owner of 5-year-old ICE
(in US $)
$50,250

Cost to Cost to
$18,250 upgrade to EV upgrade to EV
$32,000 -66%
$11,000

$4,300
$5,000 $1,000
$700

e4W ICE residual Net EV Battery BMS Installation Electrical EV

value premium pack component retrofit kit

Note: e4W = price of electric Hyundai Kona, Indonesia; BMS = battery management system
Source: Arthur D. Little

ELECTRIFYING THE FUTURE 5

 VIEWPOINT ARTHUR D. LITTLE

ELECTRIFYING THE FUTURE 6

 VIEWPOINT ARTHUR D. LITTLE

TECHNOLOGIES The growth of the EV market indicates progress,

but most vehicles on the road are still powered
DESIGNED TO
by fossil fuels. According to IEA, electric cars
DECARBONIZE STEEL
accounted for only 4% of the overall car market
PRODUCTION STILL in 2020, with a projected increase to 7% by 2030,
FA C E S I G N I F I C A N T highlighting the significant gap that needs to

CHALLENGES be bridged to achieve widespread EV adoption.

Increased EV conversion would allow countries to
reduce emissions before a complete changeover
to new EVs. EV conversion would lead to a fast rise
EV conversion extends the in EV penetration and thus high demand for EV
ICE vehicle lifecycle charging, reducing the chicken-and-egg dilemma
mentioned earlier.
A midsized ICE vehicle produces approximately
24 tons of CO2 during its lifecycle. Around 5.6 tons Of course, EV conversion is not suitable in all

of that CO2 comes from the carbon footprint of situations (see Figure 6). For example, ride-hailing

the production process, with about 75% of that service providers must factor reliability and

contributed by the steel used in the vehicle’s range into their purchasing calculations, which

structure. Steel production is energy-intensive, might lead them to purchase new EVs rather than

accounting for around for 8% of global CO2 convert older ICE vehicles.

emissions, according to industry data. Technologies

designed to decarbonize steel production (e.g., MARK E T OVERVIE W &
carbon capture and storage, electric arc furnaces, RECOMMENDATIONS
and hydrogen-based direct-reduced iron) still face
significant challenges. In contrast, EV conversion The EV conversion market is in a nascent stage,

prolongs the lifespan of existing ICE vehicles, although it’s poised for significant growth and

resulting in decreased demand for new vehicles and innovation. This section focuses on the prevailing

thus carbon-intensive materials like steel. Reduced dynamics of key industry players, the market

demand would eliminate a substantial amount potential of EV conversion, and the issues

of CO2 emissions associated with the vehicle- hindering widespread adoption.

manufacturing process.
Key players: OEMs & start-ups

EV conversion caters to the existing ICE base

Only a handful of traditional automotive OEMs

Government EV targets primarily focus on new are experimenting with EV conversion, including

vehicle sales, essentially ignoring the existing Renault, Nissan, Volkswagen, and Toyota. OEMs

stock of ICE vehicles, a major source of GHG find it difficult to balance existing product lines,

emissions (refer to Figure 2). To put this in which rely heavily on ICEs, with the investments

perspective, in 2019, India’s transport sector and resources needed for EV conversion. A focus

emitted almost 320 metric tons of CO2, according on EV conversion also involves a fundamental

to IEA. That’s around 15% of the country’s overall shift in the OEM business model because EV

carbon emissions, and more than 90% of it is from conversion could cannibalize sales of EV and

existing vehicles in the road-transport segment. ICE vehicles.

ELECTRIFYING THE FUTURE 7

 VIEWPOINT ARTHUR D. LITTLE

Figure 6. Relevance of EV conversion based on use case

Figure 6. Relevance of EV conversion based on use case

Daily distance Product1

Customer type Typical vehicle type Key considerations
range relevance

Ride hailing 200-300 km • Reliability is critical to minimize vehicle downtime

Low
Sedans Vans • Range must be >200 km to maximize daily operation
(including taxis )

• Price-sensitive customer may consider EV conversion

Private car 25-80 km as asset if use is extended
owners Sedans Vans LCV (PUP) • Wealthy & middle-class drivers connect vehicle ownership Low
with prestige; hence, limited scope for converted EV

Long-haul • Asset maximization & usage is key factor

logistics HDT/MDT 250-300 km • Most vehicles are for long-distance driving
Low

Short-haul • Last-mile logistics may be attractive as distance is low

logistics Vans LCV (PUP) 50-150 km • No-entry restriction in city areas may increase Med
attractiveness for such services

• Cost is a consideration in places where post-COVID

Government 25-80 km
government budgets are limited Med
Sedans • May consider EV conversion to spread awareness
about sustainability & EVs

Short-term • For fleet owner, asset usage & maximization is key

Sedans Vans LCV (PUP) 150-180 km • EV conversion service can cater to requirement, High
rental provided minimum range is met

• Executive would prefer new vehicle

State-owned • Mid-mile and last-mile logistics can be executed High
Sedans Vans LCV (PUP) 150-180 km
enterprise by converted EV given sustainability/CN targets
• Large distance outsourced to logistics firm
• For company fleets used for executives in sales activity,
Corporate
Sedans Vans 50-100 km cost is a key driver High
executive vehicle • EV conversion fits range requirement

Immediate target segment Future target segment

Note: (1) OEM conversion and retrofit service

Source: Arthur D. Little
Note: (1) OEM conversion and retrofit service
Source: Arthur D. Little

Currently, start-ups dominate the EV conversion Market potential

industry. They can quickly respond to changes
EV conversion has a long way to go before it
in market dynamics while catering to the
reaches large-scale acceptance. With a scattered
customized needs of potential customers.
market led by start-ups converting ICE vehicles
Australia-based SEA Electric is a good example.
in small numbers, the EV conversion market
Founded in 2012, SEA Electric spent five years
is forecasted to be only 2%-3% of the overall
in R&D before announcing the launch of five EV
automotive market from 2022–2032. The global
models. It recently entered the EV conversion
market for EV conversion was estimated at
space, and this year reached a $700 million deal
approximately $60 billion in 2022 and is projected
to convert 8,500 Toyota Hilux and Land Cruiser
to grow to between $125-$133 billion by 2032.
into EVs for use in mines.
In comparison, the global automotive market is
projected to grow to between $6-$7 trillion by 2032.

ELECTRIFYING THE FUTURE 8

 VIEWPOINT ARTHUR D. LITTLE

CONCLUSION

O B S TA C L E S T O A C H I E V I N G
L ARGE-SCALE EV CONVERSION

WITH THE RIGHT APPROACH, E V CONVERSION CAN

R E S H A P E T H E F U T U R E O F S U S TA I N A B L E M O B I L I T Y

Five obstacles must be overcome for EV conversion to reach its full

potential:

1 Absence of uniformity in the regulatory environment. There’s

a lack of uniform EV conversion regulations across countries.
For example, Japan and Indonesia have detailed guidelines
requiring certification for EV kits, retrofitting processes, and
emissions compliance; China and India have limited regulations;
and Malaysia and Thailand are working on developing standards.
This creates barriers for companies providing conversion kits
and for customers considering EV conversions, as compliance
with regulations is too uncertain. Collaboration between EV
conversion players and regulators is essential to address this
issue. Involvement from traditional OEMs is also necessary —
this collaboration should focus on promoting the development
of industry-wide standards through regulatory sandboxes.

ELECTRIFYING THE FUTURE 9

 VIEWPOINT ARTHUR D. LITTLE

2 Lack of defined technical standards for ICE-to-EV

conversions. Factors like vehicle age, structural integrity, space
availability (to accommodate a battery pack, electric motor, and
other components without reducing passenger/cargo capacity),
and post-conversion use case play a crucial role in determining
suitability for conversion. The absence of universally accepted
technical standards for ICE-to-EV conversions poses a significant
challenge to growth in this industry. Currently, EV players use
a variety of conversion methods, leading to safety risks and
inconsistent vehicle performance. Addressing these concerns
will involve establishing common technical standards that define
vehicle-eligibility criteria (in terms of age/km run), guidelines
for battery selection, and other integration specifications.
Collaboration among EV conversion players, regulatory bodies,
and industry experts will be vital to developing these standards.

3 Lack of customer awareness about EV conversion. Most vehicle

owners are unaware that their ICE vehicles can be converted to
EVs. Awareness campaigns that incorporate strategic advertising
methods are needed, along with experiential centers where
potential buyers can gain insights into the conversion process
and test-drive converted vehicles. EV conversion start-ups should
focus on capturing the attention of commercial fleet owners
to secure high-volume orders; traditional OEMs could offer EV
conversion as an add-on service when cars are brought in for
routine maintenance.

4 Warranty concerns. The absence of a comprehensive warranty for

EV conversions creates uncertainty among vehicle owners regarding
the reliability, durability, and ongoing maintenance of their
converted vehicles. Although OEM warranties cover EV batteries and
drivetrains, the remaining components and the conversion process
lack adequate coverage. By offering a warranty tailored to converted
components (e.g., battery motor, controller) and integrating it with
services like EV charging infrastructure integration, EV conversion
companies can establish a unique competitive advantage while
addressing customer concerns.

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 VIEWPOINT ARTHUR D. LITTLE

5 Financing and insurance concerns. In emerging economies,

where a significant portion of automotive purchases rely on
credit, financing availability can be a decisive factor. In India,
most passenger cars (80%) and commercial vehicles (100%)
are purchased with credit, according to the Times of India. The
availability of affordable insurance products for converted EVs
is also a decisive factor for consumers. As they’re developed,
regulatory frameworks and technical standards will provide a
basis for financial institutions to finance EV conversions and
insurers to provide insurance products. EV conversion start-
ups will want to forge partnerships with fintechs and insurance
companies to offer credit and insurance products, further
promoting the adoption of EV conversions.

The benefits of EV conversion, however, outweigh the obstacles.

Conversion provides a cost-effective approach to electrification,
reduces carbon emissions across the value chain, and targets the
ICE vehicle base that generates most CO2 emissions. As OEMs
and EV conversion start-ups venture into this space, collaboration,
innovation, and strategic partnerships will be essential to
address challenges and unlock the full potential of EV conversion.
Governments, regulatory bodies, and industry stakeholders should
work together to establish favorable policies, harmonize standards,
and invest in the necessary infrastructure to support widespread
EV conversion adoption. With the right approach, EV conversion
can reshape the future of sustainable mobility, making a significant
contribution toward achieving global net-zero emissions.

ELECTRIFYING THE FUTURE 11

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