Tuesday, November 8, 2011

Putting a Spark in the Electric Vehicles Market

Take up for electric car grants fell sharply in the third quarter of 2011, with only 106 applications for the scheme. The plug-in car grant was launched with great fanfare at the start of 2011 and 465 grants were awarded in its first three months of operation. In the second quarter this dropped to 215, before falling again in the latest quarter.

£43 million has been allocated by the Department for Transport for the first round of the scheme, which runs until the end of March 2012. The maximum grant is £5,000, or 25% of the vehicle’s cost, but at the current rate of uptake there will be a very large underspend come March.

The finger of blame for the lack of interest in the scheme has been pointed at the poor choice of qualifying vehicles currently available. The figures suggest that a number of early adopters were waiting for a grant to get to get their hands on a new vehicle, however with the needs of this group met electric cars are struggling to find buyers.

The market may yet be turned round by the arrival of the innovative Vauxhall Ampera early next year. The Ampera is an electric vehicle with a 40 mile range, but crucially if the battery runs flat it has a small petrol motor to keep it running. This eliminates the problem of ‘range anxiety’ and makes the Ampera a practical choice for nearly all drivers.

However, the Ampera is likely to set buyers back a cool £29,000 (including the grant) when it arrives next year. This is a £10,000 premium over the most fuel efficient conventional vehicles of the same size, and at current diesel and electricity prices it would take over 180,000 miles of all electric motoring to repay the additional outlay.

10 years ago similar economics faced the first UK adopters of hybrid (petrol-electric) cars. The first generation of the now ubiquitous Toyota Prius was a far from great proposition, and even with the Government purchase grant available at the time it made little economic sense. However, hybrids were thrown a lifeline in 2003 when they were given exemption from the London Congestion Charge. A £5 per day saving, combined with new, better vehicles, allowed hybrids to gain a toe hold in the UK market.

The prospect of exemptions being used again to help pure electric vehicles were quashed last year though when the Mayor’s introduced a new ‘Greener Vehicle Discount’. This allows free entry to the Congestion Charge zone for all vehicles with emissions of less than 100 g/CO2 per kilometre. Cheap, conventional diesel vehicles that slip in under this limit are now ten a penny, making a pure electric cars a poor value purchase.

Rumours are abound though that the Mayor is considering reviewing the exemptions once again, and may set a CO2 limit that only the best hybrid and pure electric vehicles can meet. Combined with the availability of vehicles such as the Ampera this may provide the spark that the grant take up figure suggest the UK electric vehicle market desperately needs.

1 comment:

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