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Electric Vehicles: batteries not included

Electric cars were the hot topic at the recent IAA show in Frankfurt. The auto industries of North America, Japan and Europe are pinning their hopes of recovery from the global downturn, at least in the medium term, on a gradually increasing but sustained demand for near-zero-emission vehicles. All-electric battery-powered cars and vans come closest to the environmentalists’ green transport ideal.

Few would dispute the emission-reducing credentials of electric vehicles (EVs). But as many have pointed out, unless the electrical power for battery charging can be obtained from solar, wind or wave energy, some polluting as well as CO2 emissions from power station smokestacks will remain.

Even for environmentally-conscious motorists and fleet owners, EV attractions will inevitably be tempered by price considerations. To date, all those companies developing serious EVs have fought shy of quoting likely prices. Running costs of an electric car will need to be significantly lower than for an equivalent gasoline or diesel engined vehicle. But the purchase price looks certain to be a lot higher, with the batteries accounting for as much as 50% of the total cost.

Because EVs will be considered first by users covering relatively short annual distances, typically in and around town, the time taken to reach break-even on the higher first cost is likely to run into several years.

If batteries are included, whether lithium-ion, nickel-cadmium or of any other viable technology, the initial cost of an EV will be - to many prospective purchasers - prohibitive. There are likely to be many back-of-envelope calculations to determine the number of kilometres the vehicle will have to travel before the up-front price premium is recouped in running cost (ie fuel) savings.

Because EVs will be considered first by users covering relatively short annual distances, typically in and around town, the time taken to reach break-even on the higher first cost is likely to run into several years. So a decision to go down the EV route will require a more than usual level of customer commitment. That in turn will require trust in the technology from the point of view of reliability and, more crucially, driving range from a full battery charge - as touted by the manufacturer. Large fleets will be in a position to acquire one or two EVs to evaluate before making a full commitment. But private buyers will not enjoy that luxury, so they can be expected to show great wariness.

It is anticipated that, in order to soften the blow of the frighteningly-high initial cost, EVs will in many cases be acquired via leasing deals - to which fleet managers are already accustomed. Getting the private buyer, who walks into the showroom and who has traditionally bought his or her cars outright, or on hire purchase, to enter into a leasing contract is likely to be more of a challenge. It will again require a commitment that could be off-putting to the cautious customer.

It is being claimed in some quarters that without another steep rise in liquid fuel prices, EVs will only take off with the help of really powerful incentives from governments

A further alternative, and one that looks set to be widely promoted by manufacturers and dealers, is for the customer to lease the batteries, while purchasing the rest of the vehicle in the traditional way. That would mean an up-front investment somewhat less than for a gasoline or diesel car or van, but with ongoing battery lease payments over say a three- or five-year contract period. Though such an arrangement is financially less burdensome, it nevertheless implies a commitment to keep the vehicle for the length of the battery lease, which again is likely to deter some otherwise interested buyers.

Financial uncertainty also surrounds the question of depreciation. The buoyancy of the market for second-hand EVs and their consequent residual value in five or six years time is as difficult to predict as the likely demand will be for new electric cars and vans. It is being claimed in some quarters that without another steep rise in liquid fuel prices, EVs will only take off with the help of really powerful incentives from governments, beyond mere low-emission zone (LEZ) concessions.

The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.