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Are electric cars going mainstream?

As governments continue to push for cars with lower CO2 emissions, most manufacturers have gone beyond simply making their diesel- and petrol-engined models more efficient (although the results of this have been impressive). They have also begun to introduce more electric and hybrid cars. Toyota took the lead with the domestic launch of its first Prius model in 1997, with worldwide rollout from 2000, but more recently Tesla has captured the headlines as a manufacturer of all-electric cars.

Until now, Tesla cars have been high-end models such as the Model S, popular with prosperous first adopters and now an everyday sight in some areas, but it is only now, with the first Model 3 rolling off the production line, that it is targeting the mass market. The entry point is $35,000, with prices in the UK and elsewhere to be announced soon, and governments are offering incentives to purchasers (funded, of course, by taxpayers, most of who own conventional cars). That’s nominally £27,000 at current exchange rates and ignoring import costs and different rates of tax. Take off the present £4,500 grant and you have an all-electric car with a nominal 215 mile range for £22,700.

That’s still quite a lot to pay for what looks like a smallish family car, but then car buying is not simply about capital cost, otherwise the road would be filled with imported Chinese models. Market forces take over. In practice, there will initially be plenty of reasonably well-off people who would be prepared to pay the price and the relatively modest production capacity will doubtless be taken up in the short term: Elon Musk says the company is looking at 5,000 units per week by the end of 2017 and double that in 2018, with initial reservations at the 400,000 mark.

Of course, despite the hype, Tesla is not the only player in town. The Nissan Leaf, for example, is on sale and, with an admittedly more modest specification, is priced at below £17,000 when the subsidy is taken into account. But until now Tesla has been the only player to produce solely electric vehicles. On the face of it that is changing, with the announcement that Volvo goes electric across the board.

Actually, this is clever public relations as much as a real game changer. What the company (now owned by the Chinese company, Geely) is actually saying is that, from 2019, all new models will be either all-electric or have hybrid drives, although the company will continue to produce petrol and diesel models. This is a change of emphasis, which leaves the market to decide on the split of actual sales, but will still be seen by some as another nail in the coffin of the internal combustion engine.

Certainly, the Volvo announcement caused a drop in the Tesla share price, but this has been very volatile in any case, being boosted a couple of days previously by the announcement that the first Model 3 would be rolling off the production line two weeks early. And we shouldn’t forget that the company, though still loss-making, has a market capitalisation greater than that of Ford (see The Tesla Bubble). Some investors really do think the future is electric.

Whether or not most car companies do at the moment is a moot point. Volvo’s conventional cars will probably continue to outsell its new electric models for some time to come, and the majority of what the company calls ‘electric’ cars will not be fully electric, but have hybrid drive systems. In fact currently, and indeed for the foreseeable future, all-electric cars are really only suitable for regular fairly short distance driving. Plug-in hybrids, on the other hand, could make a real difference to urban air pollution while retaining the long-distance flexibility of the internal combustion engine, albeit at a price and weight premium.

With governments demanding lower and lower emissions from the range of models produced by any single manufacturer, it makes absolute sense to launch a hybrid and electric vehicles to be sold in a competitive market, while continuing incremental improvement of petrol- and diesel-fuelled models. And, although expensive to produce, electric and hybrid drive trains once developed can be fitted across a wide range of vehicles. For fully electric vehicles, the engineering is indeed simpler than for conventional cars.

The really big issue for Tesla, Volvo and others is consumer reaction. Tesla’s future depends upon the Model 3, as sales of its current upmarket range have plateaued. The company can probably continue to attract investment without making a profit for some time to come, as long as Model 3 sales are close to the projections over the next two years. Elon Musk is a high profile front man and key to the company’s success so far, in a way analogous to Steve Job’s role in Apple. But it is uniquely vulnerable, being totally committed to a single technology.

Meanwhile, Toyota, Volvo and others will continue to offer a range of models and individual motorists will make their choice. Even with subsidies, electric and hybrid vehicles remain relatively expensive for their capabilities and currently are not for everyone. It would be easy to foresee a near future in which hybrids became the largest sector in some urban areas, with benefits to the local air quality, but in other respects the end of the internal combustion engine has, like Mark Twain’s death, been exaggerated.

Charging points are becoming more common but, given the time needed to replenish batteries, it is not simply a case of providing them in similar numbers to current petrol pumps. What would be an adequate coverage currently lies in the realm of mathematical modellers. In the meantime, range anxiety will be an every present problem. Lower fuel costs are also promised, but it is inconceivable that the £30bn plus that the Treasury receives in fuel duty will not be recouped from drivers of electric cars in some other way.

Ultimately, most buyers of electric cars believe them to be more environmentally friendly, but this is certainly not a black and white issue. Forgetting for now about urban air pollution, the use of battery power simply pushes emissions back to the power station. Unless the generating system changes quite dramatically, overall emissions will barely drop. And, of course, we will need a lot more power stations.

This week’s news from Tesla and Volvo is interesting, but certainly does not mean that fully electric cars will soon be taking a significant market share.