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The rise of the electric car

In the last few days, we have seen reports such as this: Electric cars will be most popular with drivers ‘in a decade’. The source of this bullish pronouncement is Go Ultra Low, which presents itself ‘the new national campaign for electric vehicles’, funded by the government (via the Office for Low Emission Vehicles, OLEV) and eight motor manufacturers (Audi, BMW, Kia, Mitsubishi, Nissan, Renault, Toyota and Volkswagen). So, this is effectively a marketing organisation, and we as taxpayers are footing part of the bill.

OLEV itself has a wider role. According to its website, it is “a team working across government to support the early market for ultra-low emission vehicles (ULEV). We are providing over £900 million to position the UK at the global forefront of ULEV development, manufacture and use. This will contribute to economic growth and will help reduce greenhouse gas emissions and air pollution on our roads.” The team has members from the Department for Transport, the Department for Business, Innovation and Skills and the Department of Energy and Climate Change.

This, of course, is part of the effort to further government policy designed to reduce carbon dioxide emissions and, as far as the transport sector is concerned, runs in parallel with biofuels policy. But let’s get back to the headline. What is the evidence for the statement on the Go Ultra Low consumer blog that “we’ve just released our new study which shows that more than half of all new cars sold in the UK could be electric from 2027, and by 2040 all new cars sold will be electric”?

First, the ‘study’ referred to seems to be nothing more than an analysis of sales reports and forecasts to come up with a press release – ‘Electric vehicle registrations to dominate new car market by 2027’ say industry experts. There’s nothing wrong with doing your own analysis and putting forward your view, but this seems to be stretching the meaning of the word study a bit.

Putting that to one side, registration figures for new cars are available from the Society of Motoring Manufacturers and Traders (the SMMT) and this is what the press release will have used as its baseline. It is important to start with to define what an electric car actually is. Assuming that this encompasses all vehicles eligible for the plug-in car grant, then ‘electric’ means both fully electric and plug-in hybrids with very limited range.

Looking at the latest figures, we see that just 517 pure electric cars were registered in May, compared to 1,828 plug-in hybrids and 3,287 hybrids without the plug-in capability. The total of new registrations (including these) was 203,585, making pure electric cars 0.25% of the total and plug-in cars 1.15% of the market.

For comparison, for the year to date, there have been 1,164,870 new cars sold, of which pure electric cars represent 0.37% and plug-ins 1.38%. Pure electric and plug-in sales have grown by 33% compared to the same time last year, but it’s still difficult to see how there could be 1.3 million of them registered in 2027, as Go Ultra Low suggests. To do so would suggest a compound annual growth rate at least high as in the last twelve months. Experience suggests that, while such growth can easily occur from a small base, it is unrealistic to expect anywhere near this rate as the market matures.

Projections for future sales come from the car magazine Auto Express, the Committee on Climate Change, the RAC Foundation and government itself. Like any projections, they may be a long way off from the reality in a decade’s time.

Electric motors for shortish journeys make a good deal of sense, particularly for urban environments. A high take up in London or other cities would reduce nitrogen dioxide and particulate emissions. We can expect that many buyers of electric and plug-in hybrids over the next few years will be city and town dwellers who drive mainly short distances. But to become the dominant car type, these vehicles have to appeal to a much wider range of motorists.

Take someone who does an average mileage of about 12,000 miles a year. Quite probably the majority of journeys will be short ones, within the typical 30 mile range of a plug-in hybrid. But the minority of longer journeys will very probably contribute at least half the total annual mileage. For such journeys, drivers have no benefit, having paid a significantly higher price for the car, despite the £4,500 grant paid to buyers.

If, in ten years’ time, 1.3 million electric cars are sold, can we really expect the economics of purchase and ownership to stay the same? It is unlikely that the price differential will have decreased significantly, so if we assume that the same level of grant as today would be needed to encourage purchase, nearly £6 billion of taxpayers’ money would be needed in subsidies in a single year, or about enough for a third Heathrow runway over three years. This is inconceivable.

At the same time, the government of the day would begin to see the approximately £30bn total revenue stream from fuel duty and VAT to begin to decline significantly. In these circumstances, the cost of electricity to charge car batteries would surely have to be increased; no government would countenance a gradual loss of a major source of revenue in this way.

Looked at in this way, the bullish predictions for electric cars begin to sound highly optimistic. Also, the rationale for their promotion needs to be questioned. Although there would be benefits in terms of urban air quality, the primary justification is to reduce carbon dioxide emissions. Given the manifest difficulties likely to prevent fully electric cars being a complete replacement for mass-market conventional cars in a decade (range, cost, charging infrastructure and charging time), the bulk of the market for electric cars will in reality be made up of plug-in hybrids.

For mixed motoring, and for both categories of car, the total fall in emissions is likely to be modest. One reason is the need to use the conventional engine for much of the mileage. However, the other reason is the real elephant in the room: emissions that would have come from a conventional engine are transferred back to an expanded electricity generating network. Unless actual output from low-carbon sources increased significantly – and the evidence so far is that this is unlikely given the need to cope with intermittency – all the clever technology and subsidies will achieve little.