By Martin Ward, manufacturer relationship manager, CAP
As electric vehicles progress from the novelty stage to become an increasingly significant part of the new and future used car market, it is instructive to take a step back, assess developments and re-examine the issues they raise.
It is to be welcomed that the Government’s £43 million temporary grant scheme, designed to encourage electric vehicles, has now reverted to the original £300m.
The £30m infrastructure money is still in place, but the Government is keen to have home and workplace charging points in place before on-street ones and this will save money.
Private money has already helped to install some charging points.
OLEV (DoT’s Office For Low Emission Vehicles) has now received 680 applications for the grant of £5,000, which it says is a little disappointing, now admitting that it may have been too optimistic. Peugeot has applied for 77 grants for the i-On, and Citroën, just a handful for C-Zero.
The majority seem to be for the Leaf, which does still have some supply constraints.
Vauxhall Ampera and Toyota Prius Plug-In have been confirmed as qualifying for the £5,000 grant.
Ampera is due to launch in the UK next March, with around 2,500 – 3,000 sales per year expected. Prius Plug-In will sell around 1,000 a year, but more if supply is improved.
Prius Plug-In is expected to be around £2,000-£3,000 more than the equivalent standard Prius, so with the £5,000 grant will cost the customer less.
Consequently, Toyota expects the Plug-In to be very popular.
No price has yet been announced for the Ampera, but we expect it to be around £29,000 after the grant.
The equivalent Chevrolet Volt will be around £28,000 after the grant.
If we add up all the extended range cars that we know are coming, there will be around 4,750 entering the market per annum, plus all the other pure electric vehicles.
Within the next two or three years we will also see the Renault Zoe, with around 4,000 for the UK. Nissan will be building around 3,000 Leafs for the UK in Sunderland and Smart will be bringing around 250 into the country.
Add to this a few Ford Focus and Volvo C30, possibly, along with a few hundred Detroit Electric Protons and it could all add up to around 9,000 pure EV cars being offered in the UK.
However, consider that in the first year only 680 have been sold.
Add together the EVs plus range extenders and we could see a market in excess of 15,000 cars. The question has to be, is this too many and can the UK absorb them?
Volkswagen has announced it plans to go mainly down the plug-in route and could have one in each model range. Mercedes-Benz also will have an E and S-Class hybrid, plus some plug-in vehicles.
Renault still hasn’t announced how it plans to sell EVs in Europe and in the UK in particular. The first to come is the Kangoo, followed by the Fluence, then Twizzy and after that, Zoe.
The Zoe is planned to be built in an as yet unbuilt plant near Paris. This plant will, if completed according to plan, build 200,000 Zoes per year, a figure many observers think is optimistic.
If Renault does decide to use its lease the battery/buy or lease the car system it will then have to borrow a lot of money, either from the banks or the French government/taxpayer.
Observers in France believe that to finance so many batteries will be too burdensome and some cynics say the only way they can possibly sell 200,000 a year is by offering the leasing way.
If 200,000 batteries have to be financed, at around £12,000 per battery, someone will be funding a staggeringly large sum when you consider that it works out over four years at 800,000 x £12,000 - £9.6 billion.
As well as being a huge number, the risks are also very large. When the money is tied up in a battery that is located in a vehicle, recovery or repossession following default will be fraught with complication.
The financials of some EVs are also fraught with challenges. For example, the Kangoo ZE electric van - which does not attract the £5,000 grant - will cost £16,990 + VAT, plus a monthly lease of £59pm for 48 months, totalling £2,832.
Add VAT onto the total of £19,822 and the cost is £23,800. A Nissan Leaf costs around £25,500 after the grant, meaning the Leaf costs £1,700 more up front than the Kangoo van.
However, after 48 months you own the Leaf entirely. With the Kangoo, you only own the van and the motors.
You then have to find the next owner to take over the battery lease and buy the van separately.
But whoever owns the battery has laid out £12,000 to get back only £3,000 after four years. I do not understand how this makes financial sense.
Nobody can be sure what is coming over the hill for the used market overall, if as many new EVs and range extenders appear in two to three years as plans currently suggest.
However, given that so few are currently being sold today, it seems there will actually be fewer on the market over the next four years than previously expected.
The amount of subsidy left will ensure all eligible cars will receive the £5,000 up until March 2015, when it is being reviewed, so there does remain a case for manufacturers at least to continue producing them.
But I remain sceptical that the main argument in favour will ever be based on the financials.