Why electric cars must catch on

Owning an electric car is no longer a dream or an inconvenience. That was the line taken by Nick Clegg, the Deputy Prime Minister, as he today announced a £500 million scheme to accelerate the take-up of low-emission vehicles.

The figures aren’t quite so flattering. Yes, sales of electric and hybrid cars are growing, but from a very low base. By and large, consumers still feel happier with the added range and convenience of petrol and diesel engines, not to mention the lower purchase prices.

And while more are coming around to the electric car way of thinking (the Government currently receives about 600 applications a month for its plug-in car grant of up to £5,000), the majority remain reluctant to open their wallets.

It perhaps, then, seems a high-risk strategy for car manufacturers to plough so much investment into a technology that so few people are buying. Most of the mainstream manufacturers now offer hybrid or all-electric models, accumulating huge development bills in the process. Can it really be worth it?

As an example, just last month Volkswagen electrified Berlin, taking over 1,000m² of the city’s old Tempelhof aerodrome for 13 days to entertain 35,000 visitors and 800 journalists, who collectively did more than 4,500 test drives in the company’s electric and hybrid fleet. An eMobility conference was held at Berlin city hall with help from the German Motor Industry Association (VDA) to make it the world’s largest electric drive event for fleet managers.

All very flash, but let's not ignore the motivation. For all the while the EU’s legislative programme rumbles on, aimed at reducing road transport carbon dioxide (CO2) emissions from 2013’s mandated fleet average of 130g/km, to 95g/km by 2020 - although late last year the German manufacturers railroaded through a derogation until 2022.

It means that when those 2020 targets are eventually adopted, Europe’s mandated CO2/fuel consumption of 95g/km/74mpg, will be one of the world’s most stringent: Japan’s equivalent will be 105g/km/63mpg; China’s 117g/km/57mpg; and America’s 121g/km/54mpg.

Could this be the real reason car manufacturers are so keen on electric cars? Well, 95g/km is achievable if you are Fiat selling lots of tiny cars with an average fleet CO2 target of 87g/km by 2020 and likewise PSA (93g/km), Toyota (93g/km), Ford (93g/km), Renault-Nissan (93g/km) and Vauxhall/Opel (96g/km).

However, it’s a different story, according to VDA projections, if you are Volkswagen (96g/km), BMW (101g/km), or Daimler (101g/km). Germans produce big, heavy, high-performance cars, which we all might aspire to, but don’t pass diddly squat in the EU’s new world.

There’s a sting in here, too. If a manufacturer’s average fleet emissions exceed 95g/km, the fine for each g/km over the total is €95 for every car produced. So if say BMW and Daimler overshoot the 95g/km EU target by as much as the VDA’s projections, then the fine will be €95 multiplied by six, multiplied by however many cars they registered in Europe for that year.

Last year BMW registered 761,477 cars in the EU, which would be a cheque made out to the EU for €434 million (£359 million). Daimler registered 658,546 cars, which would be €375 million (£310 million). No wonder they’ve been sweating so much they sent Angela Merkel into battle on their behalf.

And if you don’t feel sorry for these big companies, remember this: it’s the car buyers who will pay for all these environmental controls and/or fines, as we have so far. One study from Aachen University (RWTH) has calculated that the step from the 130g/km fleet average to 95g/km will cost each new European car buyer between €2,000 and €3,600 (£1,654 - £2,977).

Super credits

There might yet be a get out, however. Along with deploying their formidable Chancellor, the Germans have another secret weapon in the form of “Key Flexibilities”, or “Super Credits”. These aren’t set in stone, but the proposal is that Super Credits would be phased in for 95 per cent of the fleet by 2020 and 100 per cent by 2021.

They would be awarded for any car achieving CO2 emissions of less than 50g/km, which would be credited with an overall average of 1.5 times their contribution towards the car maker’s overall fleet average. The nitty gritty is that in 2020 Super Credit cars would accrue two times their benefit, scaling back to 1.67 times in 2021, 1.33 times in 2022 and so on, bringing a maximum of 7.5g of CO2 fleet credit.

So take BMW’s battery-electric i3, for example. The i program is rumoured to have cost about £2 billion to develop and there is no way that at a sticker price of about £30,000 the carbon-fibre and aluminium i3 is covering its development costs. Yet if those 30,000 plus cars helped avoid a fine of almost half a billion Euros for the rest of BMW’s fleet it could be money well spent.

Let’s not be too cynical though. Because to be fair to BMW and the VDA, the point about the i3 or its battery electric rivals isn’t just to beat EU legislators. The goal remains as always: to learn some lessons that will help reduce emissions sustainably and in the long term. What Mr Clegg and his colleagues must do it's work out how best to get the public to buy into it too.