Why the low oil price will not harm sales of electric cars
By S.W.
FILLING the tank is one of the more painful aspects of modern motoring as numbers whirr on the pump at wallet-draining speed. The falling price of oil has at least brought some relief to drivers. Indeed, it is widely assumed that tumbling oil prices will put a dent in the sales of electric cars, as internal combustion engines become increasingly cheap to run. Even carmakers such as BMW have admitted that they fear their battery-powered vehicles will take a hit. But for buyers of electric cars, the relative cost of refuelling is in fact a minor consideration. And the popularity of electric cars in the years to come will depend much more on improvements to their performance than on the oil price. Why?
Electric vehicles are unlikely to fall too far out of favour in the short term, partly because they are hardly in favour. Of the 1 billion vehicles on the world’s roads fewer than 1m are powered by electricity alone. Battery power can cut the bills considerably. An electric car with a range of 90 miles, typical for most new models, can cost as little as $2 to recharge. But buyers of electric cars are not looking for cheap motoring. Electric cars are expensive. Compared with diesel and petrol models with super-frugal new internal combustion engines, the upfront costs of electric vehicles are prohibitive, even after the generous subsidies that many governments provide.
Electric cars attract some buyers not because they are cheap but because they are expensive. They serve as a badge for committed greens to demonstrate to the world that they care about the environment, no matter what the cost. The absence of tailpipe emissions of carbon dioxide and other noxious pollutants may give drivers a green glow. Tesla owners, who can shell out over $100,000 for one of the company’s luxury electric saloons, are not looking for budget motoring but status as cutting-edge techies. Low maintenance costs and the ability to recharge at home add to the appeal of electric cars. But they have other benefits, too. Exemption from London’s congestion charge, free parking in some urban areas and the ability to zip around congested Chinese megacities that heavily restrict petrol-powered cars are all selling points. All this can make owning a car less of a hassle, for those prepared to splash out on an electric model.
Why established carmakers, and not tech firms, will build the cars of the future
In the long run, the cost of the vehicles themselves will be far more influential than the oil price when it comes to getting people to buy them. The battery in a Nissan Leaf, the world’s bestselling electric car, accounts for half the selling price. A breakthrough in battery chemistry or another technology, such a regenerative braking, will be needed to bring costs down enough to make electric cars a realistic mass-market prospect. And the lower the battery cost, the less sensitive the payback period is to fuel prices. Electric motoring has many drawbacks. The challenges of overcoming a lack of infrastructure, and establishing a second-hand market (because batteries degrade over time and are pricey to replace), have yet to be resolved. If electric cars fail to catch on, low fuel prices will not be the reason.
