Tesla Electric car

Electric cars are sparking an interest but will the engine fire?

By: David Bailey @dgbailey
Published: Friday, November 14, 2014 - 16:30 GMT Jump to Comments

As the UN Intergovernmental Panel on Climate Change issues a stark warning on global warming and amid mounting evidence of the danger to health posed by particulate emissions in diesel exhaust, David Bailey looks at what is holding up the take up of electric vehicles.

The last few years have been widely seen as the start of the ‘new electric car era’. The first volume electric cars were launched in the form of the Chevy Volt, Nissan Leaf, BMW i-3 and Tesla Model S. ‘Electric power is the future’ – that’s if you believe Renault/Nissan CEO Carlos Ghosn who has said that electric cars will make up 10% of sales by 2020.

Slightly less bullish but still optimistic, the average forecast of a KPMG survey of 200 auto industry executives saw electric cars accounting for 6% to 10% of world car sales by 2025. Yet in stark contrast, earlier this year the oil firms BP and Exxon released data suggesting that they think electric cars and plug-in hybrids will make up just 4 to 5% of all cars in the world in 20 to 30 years’ time.

‘They would say that wouldn’t they,’ was my initial reaction to the oil firms. But on reflection, maybe it’s worth noting that these firms are making big investments in oil refining and capacity and could lose out big time if they get such forecasts wrong. Or look at it another way, if a ‘de-carbonisation’ of the economy, including transport, is needed, maybe we’re not doing enough to move it along. So far, at least anyway.

While the electric car may still be the future, electric vehicle (EV) sales so far have been disappointing. Partly that was due to huge over-hyping early on. Indeed, the first genuinely viable cars are only now here in the form of the BMW i3, Nissan Leaf 2 and Tesla Model S, and take up of those has actually been on a par with the first hybrids, so I’m a bit more positive that EVs will have some role to play in future urban mobility.

Despite that, it’s true that take up has only really happened on a big scale in Norway thanks to substantial government support. Consultants IHI recently said that by 2020 electric cars will still account for under 1% of the total vehicle market.

As I noted in an earlier column, Renault-Nissan’s CEO Carlos Ghosn said last year that sales in electric vehicles were at least four years behind targets, and he blamed this on the slow rollout of support infrastructure.

That may play a part, but I reckon that range needs to double and prices halve before this really becomes a serious goer outside of urban areas. And I say that as a committed EV driver (I enjoy driving a Leaf). There are wider factors at work.

Firstly, even after a hefty subsidy, new electric cars are very expensive. The price of EVs average well over £20,000 (including the plug-in grant of £5,000) for cars that are predominantly in the ‘supermini’ class and are at least twice the price of their petrol/diesel equivalents.

This means that the market for electric vehicles amongst private consumers has so far been restricted to the wealthy and the green. Even with much lower running costs, consumers baulk at such high up-front costs, especially when they also consider issues such as performance, range, ability to refuel and so on. And with big advances taking place in the efficiency of petrol and diesel engines, so far electric cars have yet to make the cut for consumers.

And therein lies the problem. Unless manufacturers make lots of them, then costs and hence the prices of electric cars won’t come down. And unless prices come down consumers won’t buy more of them. It’s a classic catch-22.

Meanwhile, cash-strapped governments are unable and/or unwilling to offer more to stimulate demand for such vehicles (China perhaps may be one exception, given its huge reserves and purchasing power).

At the moment everyone seems to be waiting for a ‘game changer’ in terms of a big breakthrough in battery technology, which could see consumers switch over in a big way. Given the uncertainty over if and when this might happen, though, no one really yet knows how much this market will take off.
So the reason that people haven’t bought electric cars in a big way so far isn’t just about the availability of charging stations as Renault’s Ghosn has argued. There are in fact a multitude of factors that put people off, of which the upfront purchase price is the big issue.

Such factors hindering the take-up of electric vehicles include: a lack of confidence in electric vehicle technology and performance; uncertainty over the lifespan of batteries which currently account for about half of the upfront purchase cost; a lack of awareness of the incentives available that make electric vehicles comparatively very cheap to run; and a relative lack of model choice, linked to a perception that electric vehicles are not very stylish. The latter is hopefully changing thanks to the launch of the i-3 and Tesla S.

Critically though, the Government missed a trick to stimulate demand with the Plug-in Car Grant. A well intentioned policy initiative, it has failed to have any significant impact. Since the launch of the Plug-In Car Grant in January 2011, there have been just 16,000 eligible cars registered under the scheme.

It was launched at a time when the choice of EVs on the market was extremely limited, when there was little intelligence on what EVs could and couldn’t do, and when the climate of austerity helped to place EVs out of reach for most of the population.

The policy mis-fired, to use an (in)appropriate turn of phrase. Instead government policy - in the short-term at least when upfront purchase costs remain prohibitive – could and should look beyond private mass market purchases. And in two ways.

Firstly, it could use subsidies to encourage the deployment of EVs in clubs/schemes that operate on a car share, pay-as-you-drive hire basis. Secondly, and perhaps offering the biggest bang for the buck, is the idea of using subsidies to promote the replacement of public and private sector fleets with EVs.

Finally it is critical that intelligence on EVs in terms of their performance, practicality and suitability is effectively disseminated so as to help consumers make informed choices.

Taken all together, these measures might help spark more interest in electric cars.

 

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Information Daily, its parent company or any associated businesses.

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