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Electric Cars Face Bleak Prospects As Europe Sales Stumble


Current Models Not Selling; What Happens When New Ones Appear?
“sales pace so slow as to be barely measurable”

Every self-respecting automobile manufacturer in Europe is planning to launch an all-electric vehicle soon, but the fact that sales are dying on the vine points to an expensive and embarrassing debacle when the next wave appears.

Initial sales of the first electric cars on the market like the Nissan Leaf and Chevrolet Volt’s European sibling the Opel-Vauxhall Ampera, are slow to say the least. Soon they will be joined by electric vehicles from Renault and Peugeot of France, Ford Europe, BMW and Mercedes, all sharing the same negative – about twice as expensive as regular counterparts, with range anxiety thrown in. That promises an expensive fight for a few reluctant customers.

The trouble is that the battle to provide motive power for tomorrow’s cars is pointing in different and very expensive directions, and manufacturers are forced to invest in new ideas to make sure that they are not left behind by an unexpected breakthrough.

Will battery-only cars win? Or plug-in hybrids, extended range electrics, fuel cells, natural gas power, or some exotic technology not yet even invented. All these technologies have noisy cheerleaders, but at the moment Europe’s favourite for the propulsion system of tomorrow is the battery-only car, and its biggest cheerleader the Renault-Nissan alliance, helped by politicians who are using huge amounts of tax-payer’s money to force their choice on car buyers. Renault has famously said that it will spend upwards of $5 billion to develop a fleet of electric vehicles because by 2020, electric-only cars will account for 10 per cent of global sales.

So far, private car buyers are digging in their heels, declaring by their actions (or lack of them) that they don’t want electric vehicles. Only corporations and municipalities, trying to flaunt their green credentials, and the odd wealthy early adopter, are buying.

Barely measurable
Western European sales of electric vehicles were just under 11,000 in the first half of 2012, according to newsletter Automotive Industry Data (AID). Peter Schmidt, AID editor, described this market share of 0.15 per cent rate as a sales pace “so slow as to be barely measurable.”

The winner, if you can call it that, was the Opel-Vauxhall Ampera, with 2,858 sales, according to AID, which with Volt sales in Europe totalled close to 3,100. (Volt sales in the U.S. were 8,817, AID said). Next came the Nissan Leaf, followed by the Bollore Bluecar, a French vehicle used for electric rentals mainly in Paris. The Ampera-Volt is an extended range electric vehicle, which has a battery-only range of up to about 40 miles. When the battery runs out an internal combustion engine kicks in, providing electricity for the battery and a further range of around 250 miles. The Leaf and Bollore are battery-only vehicles.

Nissan Leaf prices start at around $41,000 (tax paid) in Britain after a $7,800 government subsidy. The Ampera costs $47,000 after the same subsidy, and after tax. France recently announced an increased subsidy of about $8,500 for battery cars and $5,000 for hybrids.

This week, Mitsubishi Motors of Japan announced it will suspend production of versions of its i-MiEV electric car which it sends to Citroen and Peugeot – the C-Zero and Peugeot iOn, because of slow sales.

Vic Heylen, director of the Flanders Centre for Automotive Research based near Antwerp, Belgium, says because of the very public backing of electric cars by some manufacturers, the electric project has become too big to fail.

Death certificate
“Latest sales figures are indeed disastrous. The EV (electric vehicle) market is dead. There is just no one with the political guts to sign the death certificate,” Heylen said.

Heylen said Renault’s ambitious plans to make batteries in Portugal have been quietly dumped, while its plans to make batteries in Flins, close to Paris, have been outsourced to Korea’s LG.

Heylen does note one very successful electric car offshoot though.

“There is a remarkable parallel and very flourishing market for subsidized support groups and websites, studies, forecast, symposia and so on. During the first three months of 2012 I counted 89 Electric Car Forums and Conferences with very high attendance fees. Prices for reports for forecast, studies etc increased from around 700 euros ($870) to around 3,000 euros ($3,700) today,” Heylen said.

Peter Schmidt, Editor of AID, said BMW’s experience as transport provider to the London Olympics is a good metaphor for the state of electric cars. BMW has allocated around 4,000 cars to shuttle Olympic bigwigs around London and included in that mainly internal combustion engine fleet are 160 battery-powered 1-Series ActiveE and 40 Mini E 2-seaters. (the battery takes up the space for Mini rear passengers). The electric cars are only used to shuttle people short distances around the Olympic site, because of the public relations disaster promised from any dead electric cars left at the roadside after attempting serious journeys.

To be fair to BMW, these two electric cars are not currently scheduled for sale. BMW is expected to launch its i3 electric city car late next year, followed by its i8 plug-in hybrid sports car the following year.

But Schmidt said today’s electric cars are not yet ready for prime-time.

Ill equipped
“Today’s first generation electric cars still remain ill-equipped for most real-life transportation tasks. So even if today’s still prohibitively high affordability hurdles were brushed aside tomorrow, reality is that today’s pure electric cars can’t match the ordinary functionality of even the most ordinary conventionally powered cars. That’s plain as day functionality like refuelling, peace of mind, driving range, payload, or for that matter luggage capacity,” Schmidt said.

This is all too negative for Roger Thornton, Consultant Director, Hybrid & Electrical Systems for British automotive consultancy Ricardo, and his colleague David Greenwood, UK Head of Product Group for Hybrid & Electric Systems. They believe manufacturers are doing the right things to eventually make electric cars a success.

“Initial sales have been heavily biased towards corporations who are seeking to reach their social responsibility targets, and early adopters, but arguably they are big enough markets to support initial production volumes. More concerning is the need to appeal to the general market in the next stage when price becomes much more sensitive. The public is still quite sceptical, worrying about journey reliability and if they can charge it. There’s lots of uncertainty to get over and new technology always takes off slower than manufacturers hope, but this is the gestation period and very early days,” Thornton said.

Greenwood said Renault’s targets are aggressive but achievable, while battery prices will come down, although perhaps not as quickly as a recent report from McKinsey suggested.

“10 per cent by 2020 (Renault’s target) is ambitious and potentially achievable and several things need to come together. Battery costs are a major influence and the ability to deliver on range and lifestyle. Commuters (with regular, daily trips) and early adopters owning more than one car will be more easily persuaded by electric vehicles, while families with one car won’t be. For them, plug-in hybrid options will be more attractive,” Greenwood said.

McKinsey, the U.S. consultancy, said in a report released last month that the price of automotive lithium ion batteries will fall dramatically by the end of the decade, and drop again by 2025.

“The price of a complete automotive battery pack could fall from $500 to $600 per kilowatt hour today to about $200 per kWh by 2020 and to about $160 by 2025,” the report said.

This would cut the cost of a Chevrolet Volt’s 16 kWh battery from around $8,000 today to about $2,500 by 2025.

Is the McKinsey projection viable?

“It’s credible but highly ambitious,” said Greenwood, “our own estimates are more conservative.”

Ricardo reckons sales of battery only, extended range and plug-in hybrid vehicles will reach around 10 per cent of vehicle sales between 2020 and 2025, but conventional engines will still figure strongly well beyond that. Fuel cells remain a credible future technology but are about 10 years behind battery cars for mass market applications.

Even slower
Meanwhile, sales in the U.S. will look good compared with Europe’s, according to Kelley Blue Book analyst Alec Gutierrez.

“In Europe, sales will likely grow even slower than in the U.S. Unemployment in the E.U. (European Union) is above 11 per cent and auto sales have been tumbling with no end in sight. The high price tag of electric vehicles will likely keep buyers away in the short term, at least until a breakthrough in battery technology allows price to come down significantly. It appears as though we are still years away from any sort of significant breakthrough” said the Irvine, California-based Gutierrez.

“While certainly an innovative technology, it will be some time yet before electric vehicle sales gather significant share in either Europe or the U.S.,” Gutierrez said.

Neil Winton – August 15, 2012

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